Personal Finance for 3’s and 5’s

by Rocket Finance

So I spent about 15 minutes a couple of nights ago, talking to my 3 and 5 year old’s about money. Nothing too complicated, no IRA, mutual funds or 401k’s were mentioned. We mostly talked about the differences between a penny, nickel, dime and quarter. How many pennies is a quarter worth? What does a penny taste like? etc. My main goal was for them to correctly identify which coin is which. Quarters are hard to distinguish from nickels and of course it is very difficult for them to grasp that the thin dime is worth more than both a penny and and nickel. The result of our conversation is that both of them know to always choose a quarter when offered an array of coins. Next I will teach them to always pick a euro over a dollar .  .  . 

I explained our allowance plan, the allowance will be given on a weekly basis instead of the monthly basis that I had originally planned. I finally came to the conclusion that while a monthly allowance is more convenient for me – it is too long to go between events for kids this age. I probably have a better shot at training their financial habits if they get money more often. I’m sure there might be weeks when I forget to give them their money or don’t have enough cash on hand, but hopefully my daughters will provide the accountability (nagging) that is necessary for me to stay faithful.

My five year old will get $1.25 per week and the 3 (almost 4) year old will get $1.00. The three categories to which they are contributing are as follows:

5 year old

  • $.12 to the church offering weekly
  • $.60 in savings
  • $.53 for spending 

3 year old

  • $.10 to the church offering weekly
  • $.50 in savings
  • $.40 for spending

The difficult part comes in teaching them the true value of money. For instance, this last Christmas, we encouraged the girls to pick out gifts for each other and their 9 month old brother. The problem is, they were not actually paying for the items – just choosing them. My three year old was especially excited about giving a gift, I hope she is just as excited when it costs her some hard-earned cash.

I have also assigned them small tasks around the house in order to teach them the connection between work and money. The three-year old has the job of picking up crumbs from under the kitchen table after every meal and the five year old can run small errands for her mother. She is also in charge of making sure that unused lights are turned off in our house.

We are using the personal finance blogger’s choice for their piggy bank and their savings accounts are set up at ING Direct.

Because of financial decisions that I made in the past, my own personal finance is as difficult as rocket science – hopefully I can pass enough knowledge on to my children so that they can avoid making the same mistakes.

Also, check out Gather Little by Little’s post on a similar topic: 3 steps to a personalized income plan for your children.


  1. 13 Responses to “Personal Finance for 3’s and 5’s”

  2. By Lynnae @ on Jan 4, 2008 | Reply

    I always love to see how other people are teaching their children about money. It’s a high priority for me, too, but I find my methods are constantly changing.

  3. By plonkee on Jan 4, 2008 | Reply

    That’s really cool. You should teach them to pick a one or two pound coin over a euro though. That’s real money.

  4. By rocketc on Jan 4, 2008 | Reply

    🙂 plonkee, at the rate things are going, I might have to teach them to pick a Canadian dollar over a US dollar. . .

  5. By rocketc on Jan 4, 2008 | Reply

    @ Lynae, I’m sure I will have to adjust as they get older – or as my job situation changes.

  6. By Aaron Stroud on Jan 6, 2008 | Reply

    rocketc, where’s your contact form or page? Maybe I’m just tired, but I can’t seem to find it.

  7. By rocketc on Jan 6, 2008 | Reply

    Maybe I need to put one up. . .no one usually tries to get a hold of me. My gmail is rocketfinance at gmail dot com. I’ll contact you through your form in a minute.

  8. By The Digerati Life on Jan 9, 2008 | Reply

    Great ideas you have here. My kids are the same ages are yours and we’re about to do some financial education as well along similar lines. I’m glad I can compare notes with you here!

  9. By Pinyo on Jan 9, 2008 | Reply

    Thank you for sharing your lovely story. As a new parent, I always enjoy reading this kind of posts.

  10. By LittleSis on Jan 23, 2008 | Reply

    As a teacher, I’m so glad for this. My second graders don’t know the value of coins . . . ugh!!! This is something I remember learning at home when Dad gave us our allowance. The only relevance they have is the snack machine that takes only quarters . . .

  11. By rocketc on Jan 23, 2008 | Reply

    I would bring pennies to school and offer all the kids 3 or 4 pennies for one quarter. You would have plenty of snack $ and they would learn their lesson. . .eventually.

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