Teaching your kids about money — and values
It’s never too early to teach your children the value of “a penny saved.” |
It’s never too soon to start teaching your kids about money — for your sake as well as theirs. In fact, the earlier children develop sensible spending and saving habits, the greater the likelihood that they’ll start their adult lives on a firm financial foundation.
Smart money management, unfortunately, isn’t included in today’s school curriculum. It’s up to you to give your kids the tools they need to handle money well. It’s never too soon to start teaching.
Here are some suggestions on how to help them understand the concepts of earning, saving, sharing, and spending.
The whats, whys, and hows
Start with the basics. As soon as your children can count, introduce them to money. Teach them what it is, how it works, and where it comes from.
Earning money and the work ethic. Give your children the opportunity to learn how to earn. Consider linking financial “rewards” to specific responsibilities. To really drive home the point, you could make an agreement or “contract” with your kids to supplement or match the money that they earn towards a special purchase.
Goal setting and delayed gratification. Do your children know the difference between needs and wants? Do they know how to set age-appropriate goals and meet them? A child who learns these skills early on is likely to carry them through to adulthood.
You can help your children learn by encouraging them to set age-appropriate goals. For example, a six-year-old might be motivated to save for a special toy, while a preteen might want to save for a video game.
Sharing and giving. Do you want to teach your children the importance of sharing and charitable giving? Make this a regular part of your family financial get-togethers.
Know-how and hands-on training
Here are some easy ways to introduce children to basic financial concepts.
Budgeting. Let your kids participate in household spending decisions. You can ask them for ideas on how to save money and reduce financial waste.
Interest. Depending on their age, children can be taught how interest and compounding work. Online calculators, such as the one available at www.yourmoney.cba.ca, will help them visualize the results.
Consider opening a savings account for your child. TD Canada Trust offers a no-fee savings account for children under 19, called the Youth Account. A passbook helps them see their savings grow.
Debt and borrowing. If your child wants to buy something right away but doesn’t have the cash, consider a loan, along with a small interest charge. This learning experience will prove valuable when your child becomes a teenager or young adult, and credit becomes easily available.
Income tax. Older children can begin to learn the ins and outs of filing income tax returns. Filing a return as soon as they have a job allows them to begin building RSP contribution room.
Remember that children learn by example, so be a good role model. When kids learn early on what things cost and how they can save and budget their money, they’ll be in a better position to manage their finances responsibly as adults.
