Your child understands basic math well by now and is ready to impart some intiial level money lessons. Teaching your child early on about money- saving and shopping wisely is very important. Teach your child that it takes effort and hard work to earn money. This may need regular reinforcement but as your child grows up and gains experience, he will become more responsible with money.
What you need to know
As a parent we can teach our child about money and its value in simple, practical and entertaining ways. One way is modeling healthy financial habits ourselves as we are our child's most influential teachers. Practice economic household rules, for example, all members conserve power by switching off lights/fans when not in use. Before going to bed, you can maintain a register where money spent on different items for the day is documented. This will keep a check on the cash outflow and also impart a valuable lesson to your child - that everyone in the family values money and keeps a track on unnecessary expenditure.
There may be times when the budget is tight and your child watches you monitoring the spending, and comes with his list of things to buy. The ideal way to deal with your child in such a situation is to tell him about the financial situation at home. Of all the things that he wants to buy, ask him to prioritize which is urgently required and tell him that particular need will be met. In this way, by exposing him to reality, he learns to prioritize his spending.
What you can do
Another wise way to teach your child about money is to explain to him how much things cost. While buying things for your child, he will be more interested in procuring the thing than getting a sense of how expensive it is unless you talk to him about the cost factor involved. Talk about what the family's cost of living is by showing him the monthly home bills like telephone, electricity, and mobile bills etc which have to be paid on time to run the house smoothly. While doing so, point out areas where your child can play a role in reducing the costs.
Teaching good money habits to your child will lay the foundation to be more careful about money as he grows up. And there's no better time than starting early.