My 23 month old doesn't know anything about money except it's shiny, and don't put it in your mouth! He knows it's good though, if he finds a coin he smiles so big his face might crack, and keeps it in his pocket, and checks to make sure it's still there often. He knows before bed when we're changing into pjs, the coin goes in his green piggy bank. That's about it.
My 5 year old: he started "working" for an allowance about 6 weeks after his 3rd birthday, and he does understand money pretty well. He can earn a quarter a day (but payday is Saturday night). Every evening he gets to put a star sticker on the day if he's earned his money. On Saturday we count the stars for the week, and that's how much he's paid. (Occasionally I'll put a second star on the day if he's done something over and above--extra patience or playing with his little brother to help me, or washing the car, or picking up branches where we've trimmed the hedges or whatever, which can be whatever I feel to give him as a bonus: a dime, or several dollars, depending on the situation). We have a 3 part bank that has cute little buildings decorated with stickers: a bank, a church, a store. I'll divide the money up so that he can put 10% into the church (tithes), 10% into the bank (savings), and then 80% he can put in the store or whatever he wants to do (his spending money).
I take care of his needs, and also his activities that I feel are good for him as part of his childhood education (soccer, kung fu, horse riding lessons) but if he wants "extra" (a neat toy or book, or to replace something he broke, or whatever) then he buys it with his own money. He is very proud of what he buys! His first purchase was a little fishing rod and then I bought the tackle box and filled it, and he and daddy had a fishing day. (I packed a special lunch, made it a big deal). His latest purchase was a soldier playset for $20 (helmet, pistol, knife, grenade, vest, dogtags, compass, canteen) and then he had to buy a new rifle because he hit it against the fence and after warning him that it would break, he kept doing it and it broke....and what good is a soldier without a gun? He doesn't like taking his money out of his bank especially for things he already had (M. bought it) and now has to buy again. He tries to take better care of things for that reason.
I try to guide him with money---yes, this souvenier shop has lots of neat things and you want 5 things.....but pick ONE thing that is your MOST favorite of these things. But I think he REALLY got it a year and a half ago when we were out and were going to get take out. I've told this story on here before, but basically he asked for chicken so we ordered from Chicken Express but then after ordering he noticed Sonic right beside us and said he wanted a grilled cheese sandwich. I said "No, we've ordered already, this is what you wanted". He insisted he changed his mind and I said "You ASKED for this, and now it's already ordered" but then I saw it as a good teaching experience so instead of arguing with him about it when he dug his heels in, I figured the chicken could be his lunch tomorrow and took him to Sonic. I said "Ok. Here's the deal. You asked for chicken. THE FAMILY is eating chicken tonight. If you eat with THE FAMILY then you are taken care of and don't need your own money for food. If you do not want to stick with what THE FAMILY is eating, you have to pay for it yourself. This sandwich costs $2. (yes I want it).....Ok, now that is 8 quarters (yes I want it).....Ok, that is 8 DAYS OF WORK, do you understand that?" (yes I want it). I bought the sandwich and took it home. I was nice and friendly, fixed everyone's plates, but wouldn't let him eat yet until I got the bank and let him count out 8 quarters to give me. He's stubborn so he didn't say anything, but you could see he was sick over giving me those quarters while he ate, and we all happily ate our chicken. Nearly 2 years later, he has NEVER done that since! And he may look at something at the store, but he doesn't want it. Occasionally he'll say "Look at this mom" and I'll look at it. If he says "Can I have it?" I'll say if you think this is good enough to buy, you're more than welcome to buy it with your money and he will put it down and say "NO I'm just looking". Very rarely will he say "Ok, yes". (And if it's something that I think is actually cool but out of his price range, I'll say "Wow. I'll keep that in mind". I MAY pick that up for a holiday gift, a "just because" gift if he's doing really good, etc but no promises). We don't have the "gimme gimme" problems that many kids have since he has the power to do so....with his own money.
They also see us save for things. We do not talk poverty or lack in our house because it goes against our spiritual beliefs, but they know that I pack daddy's lunch because I plan menus and make food most of the time to save money. We have a large jar on the bar that we save money with, we cut coupons (nothing extreme), etc. I have him help me with shopping (broccoli or asparagus? how do they look? what's the price?) They see that everyday we make choices and some of them touch on saving money but still having a good time. (We pulled him out of part time daycare since he wasn't really learning much and was getting socialization through other activities we are in......but then we take 1/2 the money we're saving from no daycare and let him do horseback riding lessons. Things like that show him that he can do one thing, but if he sacrifices here, he can do something much cooler elsewhere).
