For many young children, grasping abstract concepts like time, talent, and money can be tricky. Yet, according to Bradford Wiles, a child development specialist with K-State Research and Extension, these ideas form the foundation for financial literacy, a skill that’s critical to understanding the world around them.

"Money is not just coins and bills—it's a symbol for time, talent, effort, and investment," Wiles explains. While this may seem complex to young minds, the concept begins to take root early. As children grow, they start to associate money with the effort they put into tasks, but the understanding of its true value often develops gradually.

At a young age, children might not differentiate between a nickel and a dime beyond their size. In fact, they might choose the larger coin simply because it seems like more. It’s an example of how the initial stages of understanding money are not about its actual worth but rather the symbolism tied to it. For children, money is often more of a visual or physical entity than a representation of work and reward, which is why it's so important to teach them gradually.

Parents are their children’s first teachers, and how adults handle money in the household can leave a lasting impression. Wiles notes that the early stages of learning about money often happen by observing adult behavior. "Children pick up on what they see in their environment, including how adults manage their finances," he explains. This can lead to early lessons about budgeting, saving, and spending—if approached thoughtfully.

For example, when a child asks for a toy in the store, many parents respond with, "We can't afford that," which could give the impression that the family is financially strained. Wiles suggests reframing the response, offering a more constructive approach: “That’s not in the budget right now” or “We have other spending priorities.” The aim here is not to discourage the child from asking for things, but to teach them that money is a resource that needs to be managed with a purpose, often focusing on long-term goals rather than short-term desires.

Another effective way to introduce the concept of money is through earning it. Wiles points out that this doesn’t necessarily mean giving children allowances or paying them for every chore, but it could include rewarding them with small amounts of money, extra playtime, or privileges for helping out around the house. These responsibilities can be simple tasks, like tidying up their toys or assisting in the kitchen, but they teach children the valuable lesson that effort is often rewarded.

"Long before children fully understand the complexities of currency, they get the basic idea of earning something in exchange for their time and effort," Wiles says. By linking effort to reward, children are essentially introduced to the fundamentals of working and saving, even if they don't yet understand the larger financial systems in place.

Teaching children about money doesn’t just happen in a vacuum; it's part of a broader approach to life skills and critical thinking. Helping children see how their contributions benefit the household, whether through tangible rewards or a sense of responsibility, lays the groundwork for financial literacy later in life.

Ultimately, as Wiles emphasizes, the key to instilling a healthy financial mindset in children is balance. Parents can guide them by modeling good financial habits, explaining their choices, and encouraging a positive attitude toward managing money. By starting early, children can develop a lifelong understanding of the value of money—and how to make it work for them.