Talking with your kids about money ranks right up there with the birds and the bees in terms of how uncomfortable things can get. The fidgeting, the proverbial “deer in the headlights” look, the awkward questions…and that’s just you!
Like all of the most important lessons you’ll teach your children, starting these conversations early and revisiting them often is the best way for your kids to foster a lifelong talent for responsible financial management.
As one of Canada’s most desirable places to live, starting early is especially important for Victoria families—and so, to kick off Financial Literacy Month on the right foot, here’s a few tips to get you started:
When to do it:
- Studies have shown that children as young as four associate the visible build-up of coins with the abstract concept of saving—and so this age is a great time to begin teaching your child the difference between saving and spending, what a need is versus a want and the idea that sometimes you need to wait before you can have something
- Research suggests that a child’s financial habits are formed as early as age seven when he or she is most into imitating parents’ behaviour—so how you handle your finances will set either a good or bad example for your children at this age. For that reason, it’s an important time to have your kids at your side when you pays the bills, regularly explaining to them what you’re saving for and why
- Bonus tip: if you have a financial advisor, bring your children along to an appointment so they can listen and ask questions about your savings plans
A few golden rules:
- Always tell the truth—lies dilute the advice you give them
- Keep them in the loop when things are tough financially (but without passing on any stress). This will give your child a better appreciation of why you can’t go out for dinner, buy the latest toy or why you choose generic products over brand names ones
- Start an allowance—but avoid linking this money to chores if you can because help around the house should just be a part of living with people in a home. Let this money cover some of the expenses you cover for your child today and then let them play with the rest. An allowance is a great introduction to budgeting and it will give your child the experience of both having money and running out of it
- Bonus tip: playing Monopoly will help your kids learn the terminology and vocabulary of money
How to model good habits:
- Shop with a list and stick to it. This will re-enforce the concept of needs versus wants. If you truly need something it will be on the list
- Shop with cash. Kids don’t understand the concept of credit until they learn that when money is gone, it’s gone—how to use and manage credit is a 2.0 lesson for tweens and teenagers, as is compound interest
- Turn off the lights. Assign younger children a job of making sure the lights are off when someone is not in that room
- Use the library—it’s literally filled with free books, videos and magazines to read
The best financial help any parent can give their child is information and experience—and your financial advisor can help you identify even more teachable moments if you’re unsure where to start. This topic is one I encounter almost daily with my Island Savings members.
Talk comfortably about money, model good savings behaviour and involve your children in household financial decisions so that they can learn first-hand that compromise is what finances are all about.