Happy Family Day for those Canadians who are in ‘Family Day Friendly Provinces’. To our American readers happy President’s Day. On either side of the border you might have some wonderful time to hang out with family. We’ll take that as an opportunity to deliver a family-themed message. How to teach kids about money.
I feel confident in suggesting that my wife and I raised two kids who are financially aware. They are certainly financially responsible. And they are work responsible.
This is a very important topic because it’s up to you to teach your kids about money. They are not going to learn the money basics at school. They are not going to learn about money and financial planning at their place of work. There is a surprising lack of financial literacy. That leads to some terrible trends and practices. The average Canadian without a work pension plan retires with just a few thousand dollars in savings.
Kids and money.
For starters we’ll have a look at a very good article from the Credit Counselling Society. They are a non-profit organization.
Here’s a few tips to teach your kids about smart money management. We’ll then see if we checked all of the ‘teach your children well’ boxes in the Roberts household.
From that article, I have edited for brevity. I will add my two cents in italics.
Examine your own attitudes about money.
Remember that children learn a lot about how to handle money by watching their parents. Be careful to set a good example.
Give your child an allowance.
As soon as your child understands that people use money to buy things they want, give them a small weekly allowance. Raise the amount each birthday to keep it in line with your child’s reasonable personal spending needs. Encourage them to plan purchases in advance.
There’s only one way to truly understand the value of money, and that ‘s to have it and spend it. Experience is the best teacher. Put money in their hands and you’ll also find out if they are a saver or a spendthrift.
Expect your child to help with family chores.
Helping around the house is part of being a family.
Yup, make them earn their keep. Money For Nothing only happens in Dire Straights songs. The chores can be small, it’s the concept of working for a living that’s important. Even when you’re a kid.
Provide extra income opportunities.
Occasionally, offer your child an opportunity to make a small amount of extra income by doing an extra chore. Help them decide what to do with the extra money they earn.
Isn’t that the greatest money and life lesson? Those who work harder get more money and get more stuff. If one lazy @$$ kid sees his brother or sister getting all the stuff, he might learn why. She’s not playing video all day. She’s doing the dishes, making her own bed.
Like dogs, kids are trainable. Dogs like treats. Kids like money.
Teach your child to save regularly.
Set up a process for saving money in a piggy bank or bank account. Regularly monitor how much has been saved, and talk to your child about goals for using their money.
Saving is a must. They cannot spend it all. If that habit continues they will one day be off to credit counselling. They will be hitting you up for mortgage monies as well. Sure you can use a piggy bank when they are very young. But as soon as possible I would suggest you open a savings account. Our kids each had a Children’s Savings Account at Tangerine. It’s important that they have their own account that they can keep an eye on.
Show your child how to be a wise consumer.
Before your child buys something, review alternative ways of spending the money to emphasize the necessity of making choices. Teach them to comparison shop for prices and quality. Discuss how advertisers persuade people to buy their products, and encourage your kids to be savvy about commercials.
We would often use kijiji . The kids learned that not everything had to be new. Most of the time they realized that they received way better value for their money by sourcing used. They also learned how to negotiate with sellers. They learned how to sell and trade as well.
Teach your child a healthy attitude towards credit.
When your child is old enough to understand what credit is, consider allowing them to borrow a small amount of extra money from you to make a major purchase. Negotiate how much your child will repay each week from their weekly allowance.
The key here is – don’t let them off the hook. The bank does not let them off the hook. Teach real life lessons.
Teach your child the value of wise investments.
When your child is old enough to understand interest rates and rate of return, play an investment game to learn about alternative investment strategies and financial risks.
We played a lot of Monopoly. Your kids can learn how to be a real estate tycoon. They can also learn how to go bankrupt by draining the savings account. This might be the first lesson on the all-important Emergency Fund.
And better yet, show them the interest that they are earning in their savings account. Go to a website such as getsmarteraboutmoney and show them the power of compound interest. Show them the returns on your investment portfolio. Open up the account and point to that big juicy dividend payment from Bell. That’s called Pay Daddy right? My kids know that I pay Bell for their phones. They also know that Bell gives that money back to me.
Teach them about making money in their sleep.
Involve your child in family financial planning.
Let your child see you planning your budget, paying bills, shopping carefully, and planning major expenditures and vacations. Explain the affordable choices.
It comes back to open communication. Let them know of the sacrifices you might make. We often shared the cost of trips. They knew that the sports fees were several thousand dollars each. The sports trips costs were often several hundred or thousands of dollars each. And of course we told them they were worth every penny. Just continue being great humans, right? And the good times can continue. They did.
Thanks again to Credit Counselling for all of the above.
More about the value of work and commitment.
More than chores we encouraged our kids to work. Our daughter started very young looking after horses. This was on the last private home in Toronto that was allowed to keep horses. It was tough work. Her boss was demanding. She was shoveling horse manure in the rain and during the freezing winter cold. She was lifting hay bales, mucking out the stalls. Cleaning the yard. She rode the horses. She was even thrown off, smashing her face real good. Of course she got back on that horse.
Kids will quit, if you let them.
No other young worker ever kept the job for more than a few weeks previous to our daughter. They ALL quit. Every one of them. He must have gone through dozens and dozens of workers. The owner of the small hobby farm offered their typical response.
This job is really hard, I think I’ll quit. I don’t really need the money, my parents will buy me whatever I want, anyways.Resignation ‘notice’.
Our daughter kept the job right up until University. Her savings rate was likely in the area of 90%. She made significant contributions to her education costs. My wife always told the kids that they need at least $10,000 of savings entering University.
Our son had an early financial boost. He was a player in a hockey commercial and he earned about $5000. He was allowed one small purchase. The rest went into that Tangerine savings account. He continued to earn and save at a high rate.
Dad, how much is in my Tangerine account now?Music to my ears …
Effort equals money. Money buys experiences.
When you teach kids about money, let them put two and two together. Money does not just fall out of trees. It shouldn’t, not even for kids. It takes effort. You have to do something to earn that money.
Our kids are both somewhat fixed on making lots of money. Surprising, as that was never the focus of their parents. We simply wanted to have enough, and to be comfortable. Certainly, I had several years of very good income. I then coasted.
Money isn’t everything. They certainly get that. But we also taught them that those who work hard usually make more money. Money can buy some of life’s wonderful pleasures. But on that topic I hope we’ll always remember …
And of course, teach them to give back. Share.
Thanks for reading. Please offer your thoughts on how to teach kids about money.
Happy Family Day, Happy President’s Day.