How To Teach Your Kids About Money!
We posted a 10-week series on our social media pages called “How to Teach Your Kids About Money”, and we have compiled a comprehensive list of our 10 tips for you below! These tips include a variety of concepts and ideas surrounding how to teach and talk to your kids about good financial practices – from toddlers and preschoolers all the way up to high school graduates and post-secondary students! Whether you realize it or not, your kids are following your lead, so make sure you are setting a good example!
Even when very young, children can start to learn about money and good financial practices. Counting is one of the basic skills related to money – teach your child to learn to recognize, sort, and count various amounts of change and small bills. This is a foundational concept – and you can start them young!
Tip #2: Exchange
Money must be exchanged for goods, and it can only be spent once! The next time you go grocery shopping with your toddler, consider giving them a small amount of money and allowing them to choose an item and then pay for it. This will illustrate the need to be selective in purchases, and the need to give up the money in order to receive the goods.
Tip #3: Earning
Consider an age-appropriate allowance which will allow a child to make spending and saving choices of their own. Extra chores can be used to provide extra income opportunities, particularly if a child is saving up for a special purchase. It is also good to talk with them about goals for using their money – spending or saving?
Tip #4: Saving
If your child is earning an allowance, discuss what portion of their income should be allocated to spending (candy, toys), saving (special toys, electronics), and sharing (with friends or donating). If your child has a piggy bank, consider the advantages of using a clear jar – your child will be able to see their money grow as they add to it! Be sure to review their savings frequently – have them count how much they have, how much more is needed for their goal, and when they will be able to reach it.
Tip #5: Sharing
The importance of learning to be content with what you have is tough even for adults – start teaching this concept young! Discuss with your child the benefits of giving back and donating, and decide on a portion of their allowance to be set aside for sharing. Help them look for ways to help others – volunteering is another great option!
BONUS Tip: check out https://www.gohenry.com/us/ – the ultimate kids’ debit card and financial education app! This is such a great tool to help introduce the concepts of earning, saving, spending, and sharing with your kids at a young age!
Tip #6: Wise Consumer
It is important for kids to learn about being a wise consumer and to shop for quality and price. A grocery store can be a great place to illustrate concepts like buying lower-priced items where quality is comparable and buying in bulk for non-perishable items where savings are available. Consider discussing the persuasiveness of advertisements and commercials – this is a great opportunity to teach them to be savvy and selective!
Tip #7: Budget
The concepts of budgeting can be introduced before your child actually needs their own personal budget. Discuss the components, including income, planned savings, and expenses. Don’t forget to talk about the fact that both inflation and interest (ah the magic of compound interest!) affect spending power over time. Be sure to outline the value of having an emergency fund as well!
Tip #8: College & Incomes
Discussions about “What do you want to be when you grow up?” can include discussion of the fact that different jobs mean different levels of income. This is also a good time to talk about salary or gross income versus take-home pay. Explain taxes, CPP, EI, medical insurance and other deductions which may reduce a paycheck.
When comparing colleges, ensure that the relative cost is part of the analysis; however, a high price tag should not necessarily be a deterrent. Explain the impact of the related degree on potential future income and how an education is an investment. It is also important for future students to look at financial aid, scholarships and grants which may be available.
Tip #9: Credit
It is important for teenagers to know about a credit rating and things that may impact it; either positively or negatively. Credit cards can be very convenient, but it is important for new holders to know about fees, high interest rates and the dangers of the minimum payment amount. This is a great time to establish a habit of paying off the balance fully each month and avoiding purchases which may prevent that (look back on our earlier posts on savings!). It is important for teenagers to know that their credit card use may impact their future ability to buy a car and/or a house.
Tip #10: Investments
Introduce your young adult children to the value of wise investments. Discuss the potential risks and rewards with investing, and consider speaking with a financial advisor. Review the difference between short-term savings (ie. emergency fund, vacations) vs long-term savings (ie. retirement) and the importance of each.Back to All Posts