4 ways to teach toddlers about money

Financial EducationNot long ago, I attended a book party for Dr. Tovah Klein, a child psychologist and author of the wonderful book How Toddlers Thrive. It was a fun crowd, full of devotees of Dr. Klein, who also heads up the Barnard Center for Toddler Development in New York City, all giving thanks to her for the wisdom that she has doled out over the years.

The fact is, there’s been an explosion in all kinds of research—everything from developmental psychology to neuroscience—which explores the first few years of life and how important these early interactions can be. Below are some tips from Dr. Klein’s book—along with my advice on how they can be used to pave the way toward raising money-smart kids.

Here are some of my favorite quotes:

1. “There is no such thing as a one-size-fits-all approach to parenting. Nurturing, supportive, loving parenting relies on your own nuanced sense of your child’s needs in the day-to-day context of his or her life.”

What it means for kids & money: Who wouldn’t agree with these wise words? We all know that every family is unique, and just because an approach works in one family doesn’t always make it right for another. Same goes for imparting money values to children.

One of Dr. Klein’s fans at the party was the actor Sarah Jessica Parker, who wrote the book’s foreword. In interviews that I’ve read with Parker over the years, I’ve learned that although her family struggled financially—so much so that Parker and her seven siblings had to rely on free school lunches and other government assistance—her mom always made it a priority to get her kids into drama, dance, and other art programs to enrich their lives. Now, clearly in the case of Parker, that investment paid off big time.

The point here is that as parents, we have to pick and choose what we value—and what we think our children need most. These value-based decisions offer us opportunities to discuss what is important to us as grown-ups. Do we opt for fancy party shoes or comfy sneakers to keep us moving and healthy? Is playing in the snow or going to the park—for free—as much fun as buying a new toy? These kinds of conversations can help instill values from a young age.

2. “The more that structure and routines are in place, the freer the child is to develop the internal control to manage his or her feelings, thoughts, and behaviors—all of what enables him to mature, grow, and learn.”

What it means for kids & money: Like your nightly pattern with bath time and bedtime, be sure you have a money routine. Just as the running bath water signals to your child that it’s time to get in the tub, a birthday check from Grandpa or a few bucks for allowance should cue an equally automatic response: let’s put at least some of it in a wallet or piggybank for savings.

Easiest way to go: make it a habit to have your kid divvy up the money among three jars—one for saving (for something big she wants down the road), one for spending (on anything she wants, within limits you set), and one for sharing (by donating to a charity she chooses). Here’s a Sesame Street video of that lesson with Elmo and me that you can watch together.

3. Having the patience to wait for what they want is a milestone during these years. Helping them wait, to delay gratification… is an important role of adults.”

What it means for kids & money: Instilling patience in kids is not so easy. Yet learning to wait is one of the biggest tasks of their tiny existence—whether standing in line for a swing at the park, or counting down the days until their birthday. Waiting is also *the* most vital lesson to teach kids when it comes to money, as it’s the key to becoming a good saver. But if we want to teach our kids to wait, we have to follow through.

Nothing illustrates this better than a 2012 study from the University of Rochester. Researchers divided toddlers into two groups and an adult told them she was leaving to get better art supplies. In group one, she kept her word, but in group two, she returned empty-handed, offering excuses. Next, the adult did the same thing with stickers: The first group got the cool stickers, the second group once again was disappointed. The kids were then given the famous marshmallow test: if they waited 15 minutes before eating a marshmallow that was put right in front of them, they’d get another. The result? Nearly two-thirds of the kids in the “reliable” grown-up group were able to wait for that second marshmallow, whereas just one kid in the broken-promises group could wait that long. Without the assurance that waiting really would be rewarded, they chose immediate gratification.

So in your own daily life with your kid, make sure that if she waits, she gets the reward…whether it’s taking her to the toy store on the exact day you said you would after she saves up the money to buy the doll she wants, or going out for ice cream after the dentist’s appointment like you promised, even if you’re running late for your next errand.

4. “For toddlers, there is no line between learning and playing. Learning is all about play.”

What it means for kids & money: Citing psychology and neuroscience studies, Dr. Klein heralds the skills that develop from playtime, like problem solving and creativity, as “the bedrocks of lifelong success.” The takeaway: Parents must take play seriously.

So be playful when teaching kids about money. At this age, a great game to try is “Want or Need?” Entertain your kid while she’s sitting in the grocery cart by quizzing her on different items (“Cookies: Want or need?” “Milk: Want or need?”). Needs get tossed in the cart. Wants stay on the shelf—well, except for maybe one or two.

And get your kid into comparing prices. Give her $1 and ask her what she’d like to buy. At the supermarket, would she choose two bananas or one peach? At the toy store, would she pick three stickers or one special pencil?

For more information, visit Money as You Grow, the website I helped create for the President’s Advisory Council on Financial Capability. It offers tips for kids age 3 to 23, but the toddler section is by far the most popular of the site (which has been visited by more than one million families!). To get started, see if your toddler knows the four money milestones for his/her age group and try a few of the activities.

What does your toddler know about money so far? And what do you do in your everyday life with your kid to teach those things? Share your stories here and on my Facebook page.

This post was originally published on Huffington Post.