Teaching Kids (Ages 4-8) About Money: Essential Financial Concepts

Teaching Kids (Ages 4-8) About Money: Essential Financial Lessons

Introducing young children to financial concepts early helps build the foundation for lifelong money habits. Research from the University of Cambridge, commissioned by the UK’s Money Advice Service, found that children as young as 3 can grasp basic concepts like value and exchange. By age 7, many have already developed core financial behaviors such as saving and spending (Habit Formation and Learning in Young Children, 2013).

Children between 4 and 8 are at the perfect stage to begin learning essential principles of earning, saving, and spending in ways that are simple, engaging, and connected to their everyday lives.

If generic parenting tips about money sometimes feel a little cheesy, or repetitive, we get it — real people want advice that feels natural and actually works for their kids. One of our favorite ways to make these lessons stick is through reading together. Good stories (with really great illustrations) create natural conversation starters, and make financial concepts feel fun instead of forced. Check out our Financial Literacy Book Recommendations page for engaging, age-appropriate picks that are not boring.

Below are key money topics and discussion suggestions for parents:

1. Understanding Money

   • What is Money? Start by explaining that money is used to buy things and comes in different forms, like coins and bills, each with a different value. Use real money to show them.

   • Identifying Coins and Bills: Teach kids how to recognize different coins and bills and their values. You can create a fun matching game with coins and their names or use play money.

     
     

2. Earning Money

   • Where Money Comes From: Help kids understand that people earn money by working. Discuss different jobs and simple ways they can earn money at home, like completing small chores (e.g., setting the table, cleaning their room).

   • Allowance: If you choose to give an allowance, explain it as an exchange for household help. If not, use money they receive as gifts to teach saving and budgeting. For example, “Let’s set aside part of your birthday money to save for a toy you want.”

     
     

3. Saving Money

   • Why Save? Explain the importance of saving for future needs or wants, like a special toy or outing. Share examples of times you saved for something as a family.

   • Piggy Bank: Use a piggy bank or money saving box to show how money can grow over time. Consider labeling jars for saving and spending to make the process interactive.

     
     

4. Spending Money

   • Making Choices: Teach that money is limited, so thoughtful decisions are necessary when making purchases. Use everyday situations, like grocery shopping, to help them practice making choices.

   • Needs vs. Wants: Help children understand the difference between needs (e.g., food, clothes) and wants (e.g., toys, treats). Encourage them to make choices based on what’s most important.

     
     

5. Price Awareness

   • Understanding Cost: Teach that different items have different prices. Use real-world examples, like comparing the cost of snacks or toys, to illustrate how pricing works.

   • Comparing Prices: Show them how to compare prices to find the best deal. Encourage them to ask questions like, “How much does this cost, and can we find it for less somewhere else?”

     
     

Making Financial Learning Fun

Children learn best through play and connection to real-life relatable experiences. Encourage hands-on learning by involving them in small financial activities, such as saving for a toy, shopping for a friend's birthday gift, making shopping decisions, or playing “pretend store.”

Simple activities like these reinforce financial lessons. By teaching these foundational lessons early, you can help your child develop healthy money habits that will benefit them for a lifetime. Check out our full list of recommended financial literacy books and activities at Financial Kid Academy for more great resources.

The information in this article is intended for general informational purposes and reflects the authors' personal views and experiences. All content is copyright © 2025 Financial KID Academy. All rights reserved.

Sources:

Money Advice Service & University of Cambridge. (2013). Habit Formation and Learning in Young Children. Retrieved from https://www.moneyadviceservice.org.uk/en/corporate/habit-formation-and-learning-in-young-children