It is never too early to begin teaching your children about financial literacy. The more your child practices financial literacy, the more equipped they will be when they become an adult. There are many ways to establish great financial habits in your child from an early age. By incorporating financial literacy into play, you can ensure that your child is building valuable skills without even knowing it. 

Why Play?

Studies show that play-based learning is the most valuable education model for preschool-aged children. When students play, they can explore a topic or an idea at their own pace in the way that makes the most sense to them. When preschoolers play in a structured environment they receive hands-on education that creates long-lasting neural pathways. Learning through play will help your child create habits that will serve them for the rest of their lives. Your preschooler will be more willing to partake in personal finance practice if it is done under the guise of playtime. You will see that your child will practice high-level finance skills if they are allowed to play with money. 

Run a Shop

One of the most valuable play scenarios for personal finance is to have your preschooler run a pretend store. With a little guidance, they will be able to establish an inventory, set prices, and exchange money. A toy cash register is a great addition to any playroom because it gives kids an opportunity to practice counting money and returning change. 

Playing store can also be used to teach your children about credit. They can pay for their items with their credit card and later have to pay the bill. A shop can also teach preschoolers about the basic principle of supply and demand. If the shop owner sells out of a product quickly, you can advise them to raise the price since that item is in demand. 

With the right assistance, kids will be practicing all of the basics of running a business and purchasing from a business all under the guise of playtime. They will have a great time playing shop or restaurant while also practicing the skills that will serve them on their future journey of personal finance. 

Play Money

One of the most important aspects of financial literacy is being comfortable around money. When preschoolers play with fake money, they get hands-on experience with both bills and change. They can use these bills and coins to work on counting and sorting. The more often a preschooler plays with money, the more capable they will be to count, sort, and save that money later on. Play money can be enhanced with the use of a calculator or cash register to teach kids how to add and subtract when money is earned or spent. Have your preschoolers practice selling and buying toys with their play money. The more experience they get while playing, the more comfortable they will be talking about finances later on in life. 

Money-Based Board Games 

Financial Literacy tools are all around us. Some of the things our preschoolers are already playing with have financial literacy lessons built-in. During the next family game night, choose a game that is based on money. Monopoly has hundreds of different versions and some are even made especially for preschool-age children. If your child is wary, have them play the first game with an adult partner to get the hang of it. After a few rounds, let your child play on their own and watch the decisions they make. Do not be afraid to correct your child’s choices so that they can stay competitive within the game. Not only will games like Monopoly and Life teach your child about money, investing, paying rent, and managing money, they will create long-lasting family memories that will stay with you and your child for a lifetime. 

Create an Annual Toy Budget

Including your child in financial planning is a great way to model how to budget and spend money properly. At the beginning of each year, sit down with your child and work with them to create an annual budget for their toys and games. Be transparent about how much you are willing to allocate to their toy fund. Allow them to divide the money across twelve months and decide how they are going to spend their money over the year. 

After your planning meeting print off a visual representation of their annual budget and allow them to track their budget throughout the year. If you go to the store and they ask for a specific item, make sure they do the paperwork to subtract that item's cost from their annual budget. Be sure to explain the value of saving up for big expenses. Explain to your child that it may be better to spread the funds out across the calendar year so they can always get the newest toy when they want it. 

For an additional layer of practice, you can have your kids keep an inventory of their toys. Have them track when new toys are added and old toys are donated. You can include a toy limit so that they are forced to donate an old toy for every new one they decide to bring in. An annual toy budget teaches preschoolers how to plan long-term and be more aware of their financial choices. They will be forced to keep track of their spending and learn how to utilize their budget to fit their needs.

Financial Play and your Preschooler

If incorporated regularly, finance-minded play can help your preschooler establish valuable habits. More importantly, it will ensure that your child is comfortable around money. The earlier a child starts to practice smart habits the more likely they are to use them when they enter the workforce. Financial literacy can improve your child's ability to think critically and make important decisions both financially and otherwise. The more practice your preschooler gets the more comfortable and confident they will be around money in their adult life.