How to Talk to Your Kids About Money
In Canada there is little formal education about money management in schools, so it is up to parents to pass on their financial knowledge to their children. But how do you do that to set them up for a lifetime of financial success? At what age should kids start learning about money?
Learn About Money Together
There are a few simple lessons you can provide in your home to teach your kids the value of money, how to budget and how to save towards their goals.
For younger children under 6, start by building money management into their daily lives through playful activities. Incorporate a financial angle into a shopping game using board game money, for example. Have them perform a task, reward them with money, and explain that now they can pay for toys they want. Younger children learn through play so its easy to incorporate money into the activities they already enjoy.
Give them a Chance to Earn
But don’t stop there. As children grow older, you can implement chores and tasks around the house so they can earn money and save for the things they want. If they have multiple goals, help them do a budget and divide their income between their goals. Help them prioritize, and allocate the right amount of money to each goal.
Explaining The Difference Between a Credit card and a Debit card
This is also the age when explaining the difference between a credit card and a debit card becomes important. Get them a bank account and a debit card and have them start depositing their earned money into that account. They’ll be so excited to watch their bank balance grow!
Consider A Shortfall Loan
If your child has a big wish list item they are saving for, why not give them a loan for the shortfall and charge them interest as they work towards paying it back? You could also suggest they sell their old items and put the money towards the new item they want or the money they borrowed. Explain how many tasks or chores they will have to do to pay it back, which will help them associate money with their time.
Teaching Kids About Invisible Costs
Another important lesson you don’t want to overlook is the cost of things they can’t see. Leaving lights on and wasting water, for example, costs money. Charing your teens when they leave the TV on, or take a 30 minute shower will quickly teach them to appreciate the expenses associated with running a household – a lesson they will thank you for when they move out on their own.
Don’t Stop at the Simple Stuff
Don’t forget to explain how compound interest, investments, saving for retirement, and how credit scores work. If you’re not confident how to explain these topics, we have several resources on our website to help you.
It takes a village to raise a child so don’t be afraid to ask for help if you’re concerned you’re not passing on the best advice. It’s better children learn about money when they are younger so they don’t learn the hard way as adults.
If you are interested to learn more check out this CTV segment about Money and Teaching our kids visit: https://www.youtube.com/watch?v=wARgkmWO5pI