Money Savvy Kids
I was raised in a home where we always seem to have money troubles, but where talking about those troubles was taboo. I know that I am responsible for my own mistakes, but I am sure this is part of the reason why I have had trouble with money management in the past. As a parent, the last thing I want is to make the same mistakes with my own kids. Do you have any tips to help me teach my kids good money management skills?
What a great question, Robert!
Every time I speak to people about kids and money, I am always reminded of a quote from U.S. financial journalist Michelle Singletary.
- If we aren’t careful, our children will come down with ‘affluenza,’ a disease that causes them to confuse wants and needs.
As parents, we typically want nothing but the best for our children. Not only do we want them to be happy and healthy, but often, we also want them to have the things we didn’t have growing up.
Whether it’s a pair of skates, the latest iPod or those new sneakers they absolutely cannot live without, our children’s wants and needs tend to take a big bite out of household budgets. Today, the average Canadian family owes $1.64 for every dollar earned. That’s a lot of money and doesn’t leave much room to spoil our kids with material things.
Like most of us, you probably learned about money from the “School of Hard Knocks,” where your financial habits were formed from your experiences – both good and bad. What you probably never knew, was that your relationship with money is more than just a financial battle; for many it’s emotional, psychological and habitual.
That’s why learning smart spending habits is crucial from a young age. As parents, it’s our responsibility to help our kids avoid the same financial problems we experienced growing up. At the save time we need to teach them valuable money management skills that will last a lifetime.
By the age of seven or eight, most kids are ready to start handling small amounts of money. Get started by involving them in financial planning and shopping. Letting them have a say in things such as the weekly grocery list and family vacations gives them an impactful and hands-on experience.
Here are some creative ways to teach your younger children to budget and save:
- No matter what they’re shopping for, give your kids a budget and let them create the shopping list. Set up a reward system if they spend less than the budgeted amount, and encourage them to browse flyers for sale items.
- Food usually gets kids’ attention. Have them help you plan your grocery list for school lunches and snacks, and let them calculate the tip at a restaurant if they are old enough.
- Save, save, save! Kids should be saving a portion of their allowance or paycheque (for those working part-time at their first jobs.) Start with 10 per cent of the amount earned. Again, this is about creating a habit that they will carry with them as they grow up.
- Need to re-stock on school supplies for next semester? Teach them to shop around for the best prices – things like pens, pencils and notebooks will likely be more affordable at a dollar store, for example.
- If your kids are set on getting that special, must-have item, use their “want” as an opportunity to help them set financial goals. Encourage your child to write down what it is they want, and help them figure out how much they have to save (allowance, income, gifts, etc.) to get it.
By helping you to plan, save and shop, as well as using their own money on selected items, your kids will learn to budget and evaluate “needs” versus “wants”. The time you spend talking money with them today will help put them on the path to financial success.
Jeffrey Schwartz is the Executive Director of Consolidated Credit Counseling Services of Canada and President of the Credit Association of Greater Toronto (CAGT).
If you have a question about your credit or just about finance in general, Jeff is here to help. Send us an email with your question to AskJeff@ConsolidatedCredit.ca. You’ll get the expert advice you need and your question may be featured here on our website.