It's never too early to learn the value of a dollar. Kids as young as three or four typically know that it takes money to buy things, but it's up to you to teach them how to save it and spend it wisely. A good place to start is a clear glass jar.
Psychologists say kids do very well with visuals, and it helps for them to see how much they're earning and how many dollars that amounts to. Experts say you can draw a line on the jar, or hang a "savings thermometer" near the jar, so your child can track how close they are to their goal. You can even put a picture of the toy on the jar as an incentive.
Give your kids the chance to earn some money by doing chores around the house. This will help them to understand that they'll have to work and save for something they'd like to buy. And if it's a big ticket item they've targeted, it's o.k. to work together with your child to pay for it.