How I am Teaching My 4-year Old About Money

About the Author

laura r. knolle

true Laura R. Knolle, CFP®, MS

Vice President
Walnut Creek, California

Author: Laura Knolle

Since I do financial planning for a living, financial literacy is very important to me. I have two high energetic boys, Jonathan (age 4), and Jordan (age 1) and I want to raise my kids to be financially smart.  I have given a lot of thought about how to teach the boys about money and asked for advice from friends who also have young children. I finally felt that I just needed to start something, see how it works, and adjust as needed. My financial literacy goals were simple: 

  1. Set the groundwork to learn the basics of money

  2. Use money as a reward to incentivize good behavior 

  3. Most importantly, make it fun.

Financial Literacy Tip #1 - Setting Up

My boys have been gifted several piggy banks over the years. Instead of purchasing something new, I wanted to utilize what we already had. I took the three piggy banks - a monkey, a pig, and Spiderman - and wrote the words SPEND, SAVE, and DONATE, in that order.  I went to the bank and got several rolls of quarters and $20.00 worth of $1.00 bills. 

Since Jordan is still too young, I developed a reward system for Jonathan, which has already been tweaked several times over the last few months. I started by having the piggy banks set up in his bedroom, then my quarters and dollar bills were placed in a drawer in the kitchen. 

He would receive $1.00 for allowance each Sunday, $0.25 for getting ready for school in the morning, and $.25 for getting ready for bed at night. After a few weeks of success, I let things slide. I was finding that we were either rushing out the door in the morning (and I didn’t have time to grab the quarter), or we were too tired at night (and I didn’t want to deal with a quarter then either).  Plus the location of the piggy banks and money was making it more inconvenient. 

I have since moved the piggy banks front and center in the kitchen. Not the ideal location but they won’t be forgotten and are a topic of discussion. The quarters and dollar bills are in the drawer directly below.  There is a bright pink sheet in front listing out how to earn money, and how to spend it.

Financial Literacy Tip #2 - Earning Money

Jonathan and I sat down to write out the new list of what he could do to earn money, in addition to $1.00 he receives for allowance on Sunday, and how he could spend it.

To earn it he can walk the dogs with mom ($.25), do what he’s asked to do ($.25), and clean up his toys ($.25).

Financial Literacy Tip #3 - SPEND Piggy Bank

One thing that is important to me is to teach my children to value experiences, not stuff.  This philosophy makes it a bit challenging when showing him how to spend money. To address that challenge, I developed a way for him to purchase experiences at home.  These include… watching one episode of a TV show ($1.00), looking at pictures on my iPhone for 10-minutes ($1.00), or watching a movie ($5.00). He can also purchase healthier “treats” such as a box of raisins ($1.00), or a juice box ($1.00).

Financial Literacy Tip #4 - SAVE Piggy Bank

Once there are a few coins in the SAVE piggy bank, I physically take him to the bank. I have a separate joint checking account open for each of my boys.  We sit down with the teller and I have them explain to him the process of depositing his money into his account. 

Financial Literacy Tip #5 - DONATE Piggy Bank

I have Jonathan take the money he has accumulated to donate to our church. The children leave the service early to attend Sunday school, so as soon as we walk in I make sure he puts it into the collection basket and the church acknowledges receipt so that he understands what he is doing.

Financial Literacy Bonus Tips and Additional Notes

In addition to learning about money, this process is also a great way to teach children how to count.  Anytime he purchases something I have him count the quarters to me, and I explain how 4 quarters equal $1.00.

I haven’t yet encouraged him which piggy bank to choose to put his money into.  For now, I let him choose to which one he would like to add. If he doesn’t want to choose, I choose for him.

Want to Know More About Financial Literacy? 

One very important thing I have learned being a parent is everything must be flexible and adjustments need to be made constantly. What worked one week may not work the next. We will also have times when we don’t stick to our plan as we would like to and that’s okay. We just get back with it when we can. By the time this blog is published, I am sure I will have made additional adjustments. 

If you want to learn more about financial literacy and money management contact an advisor today!



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