Opportunity Costs: Teaching About Finances to Early Elementary

In the kindergarten through third grade years, kids are aware of money but don’t really “get” how it works. Although they may know two dollars equals one comic book, the overall concept is too abstract for their level of development. While your kids are this age, teaching them about opportunity costs is one of the best avenues to prepare them to learn more direct lessons about wise spending later on.

Opportunity Costs

As you might remember from your high school economics class, an opportunity cost is when you lose the chance to do or buy one thing because you chose to do or buy another. If you have two offers for dinner on Friday night, you have to choose one. With $10 in your pocket, you can only buy one snack at the movie theater.

Your 5 through 9 year olds might not understand about budgeting, but they can understand choices and the process of elimination.

Making Opportunities and Choices Clear

The best way to drive home the idea of opportunity costs is to take the time to explain choices as they are made. This works both for your choices and for the choices you give your little ones. Allowance works well here, since an appropriate allowance for a younger child is never large enough to buy everything he or she wants. Time is another great teacher of this concept – especially if you frame your child’s choices in terms of an “either/or.”

Playing Games

Children at this age are old enough to play and enjoy board games, which can be an excellent lesson plan for opportunity costs. Buying Park Place in Monopoly means not having money for Boardwalk on your next turn. Moving one checker forbids moving another. For older kids in this age group, more complex games like Risk and Scrabble can teach this lesson even more effectively.  

Savings and Opportunity

Saving money for later is too far removed for some kids at this age, but you can introduce the concept by encouraging your child to save for something concrete. A dollar today buys a candy bar at the store, but saving a dollar a week buys something larger or nicer. For K through 3rd grade kids, it helps to have a visual reminder of what your kids are saving for: a picture, or a jam jar filling with cash can make the savings feel real. If you’re willing, you can even buy the coveted item and place it out of reach until your kids save the required money.


Life is full of choices, which means it’s full of opportunities to teach about opportunity costs. The trick is to stay alert for those “teachable moments” so your kids get real-life, concrete examples of this abstract concept.