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Coins, bills, dollar signs, checkbooks, and credit cards all seem commonplace to you, but imagine how confusing they are for children. If you have ever had a conversation with an articulate preschooler about money, you may be surprised to hear all of the outlandish things they believe. Some think you can print money when you run out, and most kids have a hard time with the idea that you'd be better off trading 20 pennies for a quarter. As a parent, it is your job to help your children understand money in several key ways.

Getting practice handling money

Even before kids can truly understand how much money is worth or what it does, they can practice handling it. When you take your kids to the store with you, let them hand over the cash and get change for the purchase. This helps tie together the idea of money being spent to get items in return.

You can also give your kids a small piggy bank and coins they can play with as soon as they are old enough for the coins to not be choking hazards. Sorting the coins into groups of the same type is the perfect activity for gaining familiarity with the types of coins, even if they do not yet know what they do.

Learning the value of money

The idea that coins and bills are "worth" a certain amount is something kids can start to grasp late in preschool. Start by teaching your kids that 100 pennies make one dollar, and then start introducing the other coins and bills. Have kids sort coins into piles that all have the same value to help them understand the equivalencies. You can even challenge them to figure out how many different ways they can make a pile that contains a specific value of money.

Balancing spending and saving

Once your kids know how to tell how much money they have, they'll be able to start saving for things they want to buy. Explain that they need to have saved money so they will have the money to spend. You can even talk to them about some of the things you save money to buy and help them brainstorm ideas of what they may want to save to buy.

Your kids should have a place to save their money. A piggy bank may be fine for young children, but if they are holding onto more than about $20 at a time, they should have a savings account at a bank or credit union. This also helps develop healthy habits of depositing money into a savings account.

Managing money wisely

Your kids are going to make some mistakes with spending money, but it is important to let them. Mistakes are opportunities for discussion about how they can manage their money more wisely in the future. You can talk about buying items on sale, distinguishing between needs and wants, and saying no to short-term wants in favor of a long-term one they want even more.

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