- Opening a youth bank account with chequing and savings features can show kids how saving and spending coexist.
- Donating money can be a fantastic exercise for the entire family, demonstrating how a little money can often go a long way.
- Learning financial literacy at a young age can help avoid money mistakes in adulthood when it matters most.
Finances are a regular part of daily life, and it can be just as important to teach your children about money as it is to teach them how to cook, clean and groom. The earlier you introduce your kids to money, the better they’ll understand how to use and manage it responsibly.
Tactics to raise money-smart kids
Teaching your children about money can be difficult because it may become second nature to you as a seasoned adult. Many of the lessons you learned about money growing up may seem foreign now. To help you guide your children toward healthy financial habits, consider the following tactics.
Teach good financial habits from an early age
There isn’t a perfect age to start teaching your children about money. The reality is that finances will always be a factor in life. The sooner your child is exposed, the faster they’ll learn how to budget, spend, and save.
When your child is under the age of five, you can start by helping them differentiate the names and values of coins and bills. At this age, you may also choose to play imaginary shop games emphasizing simple math and money.
Other ways to engage your children with money:
- Grocery shopping: You can also have children help you clip coupons when they’re old enough to handle scissors under your supervision. This task can test the concept of money as well as the importance of planning purchases.
- Coin collecting: Collecting coins can help drive savings habits. Plus, quarters are fun because they often have funky designs on them!
These are simple ideas of how you can teach your child good financial practices at an early age. Every child is unique, so get creative on learning methods and approaches!
Open a bank account for your child
When you feel that it is appropriate, you can open a bank account in your child’s name and introduce them to the process of visiting a bank branch or accessing digital banking. Show them how to deposit money, take out cash, and make transactions like depositing a birthday cheque, for example.
Before you head to the bank to open an account, however, make sure to check the list of application requirements. You may need several pieces of documentation, not only for your child but also for yourself as the parent or legal guardian, including social insurance numbers (SINs) and identification.
The best youth bank accounts have both chequing and savings features, which can show your child how saving and spending complement each other. You may choose to deposit an allowance into your child’s bank account regularly or visit the bank to make a cash deposit when they receive a cash gift. When you make a deposit, it is also important to show your child that their money is growing.
Eventually, you can help them set up direct deposits with their employer when they start their first part-time job. These lessons can evolve and grow with your child as they enter new chapters of their life.
Teach your child about how savings work
When your child is old enough to understand more complex financial concepts, you can help them appreciate price comparison when shopping, the value per dollar spent, and how to budget. Where you can, encourage your child to put these customs to use. If they’re not experiencing it firsthand, they may not retain the knowledge or build these positive financial habits.
Saving can be a tricky subject to teach. The critical point is that savings are accumulated slowly over time by putting aside a small portion of earned money when it is received.
Another good money lesson can be to teach your child about different types of savings. Many people have short-term and long-term savings goals. For example, you might be saving for a vacation next year and also saving for retirement. Be sure to help your children develop strategies to meet their financial goals, even if that means saving up to buy that new toy or donate to their favourite charity.
Allowance should be earned, similarly to a Job
Of course, you love your kids and want to give them everything. However, giving your children money for no specific reason can teach them that money is handed out, not earned.
Implement some sort of routine that your child completes before receiving their allowance. Chores could be as simple as helping around the house, cleaning their room, or completing all of their homework. Think of it this way; you’ll get help around the house and teach your child about earning money at the same time!
Reward kids for good grades, similarly to a bonus
School and employment teach many of the same principles. For this reason, you can use good grades as a way for your child to earn a bonus payment from you and can help them understand that a little extra dedication can pay off, similarly to a bonus at a job.
Help kids spend money wisely
Most children don’t know what a reasonable value for something is, such as a meal or a piece of clothing. It’s not their fault; they’ve simply never had to consider the cost of something before.
That’s why it’s essential to teach children to spend wisely. You can do a few things, such as take your child to the grocery store or mall with you or give them an allowance for lunch at school. This practice can help them set a personal budget for themselves. This scenario is also an excellent opportunity to teach your child about impulse spending. Money isn’t infinite and should be allocated wisely.
Teach the value of donating
Children might not understand that there are less fortunate people in the world. Philanthropy can be a fantastic way to teach children about the value of money.
You can encourage your child to pick a cause that they care about and donate together. You may even be able to break down exactly how their contribution made a difference.
Importance of guidance
Every parent should teach their child about money in one way or another. If you don’t, you could run the risk of your child mishandling money, credit cards, or other money products in the future. Teaching your child good financial habits now can set them up for success.
Whatever tactics you choose to use to teach your child about finances, keep in mind that the process should be about guidance. Be there to answer questions, but don’t do everything for them. Let your child make mistakes and learn from them. It’s better to make small money mistakes as a kid with pocket-change than big blunders as a young adult with a credit card and a credit score.