When is a good time to start talking to your kids about personal finances? High school? Grade five? Kindergarten? According to a survey by Alberta Education, 90% of Albertans want their kids to learn about finances as early as elementary school.
A recent report on the financial wellbeing of Canadians by the Financial Consumer Agency of Canada found that Canadians who have been consistent savers throughout their lives are proven to have higher levels of financial resilience and financial wellbeing. Teaching our children these good financial habits from an early age gives them a much better chance of maintaining healthy finances in adulthood.
While Albertan high school students are offered financial management courses, there are plenty of ways you can introduce your kids to good financial habits from a much earlier age.
Teaching our children one of the key strategies for financial wellbeing—delayed gratification—can start very early.
1 - The Treat Jar
Have a jar filled with your kids’ favourite treats, from which they can only pick some at the weekend. They gain the early learning that they have to wait a week before getting another treat from the jar.
2 - Play Store Owner
Playing games where your child is a store owner and you are the customer helps them understand the value of money. By playing with real cash rather than play money, your kids will not only learn what each coin and banknote is worth, they will also improve their math skills. Emphasize the fact that they need to look after their money, because if they lose it, it’s gone for good.
3 - In The Bank
Give them a jar where they can save any money they receive, such as birthday gifts or from the tooth fairy. If they want to buy themselves a new toy, have them take the money out to pay for it and then show them how much is left in the bank. Helping them appreciate that spending depletes their funds is a great early financial lesson.
This is a good age to teach your children the difference between what they want and what they need.
1 - Wants vs. Needs Game
Turn this into a game by making two labels: Want and Need. Go around their bedrooms, have your children label everything there and then discuss why something may be a want rather than a need.
2 - The Benefits of Saving
Once they receive an allowance, have them save a certain amount every week and explain the benefits of saving to be able to afford more expensive items.Creating a savings goal will help to focus their minds on why it is good to save. If there is a particular toy or video game console they want, for example, work out how many weeks of saving it will take them to get there. You can give them an incentive by offering to match every dollar that they save, or to top up their savings once they reach a certain amount. Mark the purchase date on the calendar, so they get excited as it draws near. It’s important not to simply give your kids their allowance money; let them know it has to be earned through assigned chores and articulated rewards.
3 - Spending, Saving and Giving
This is a great age to introduce the concept of giving. Have them divide their allowance into three different money jars, labelled Spending, Saving and Giving. Help them set up percentage amounts for each category to stick to, and set up their own savings account to have them deposit the "saving" money into every month.
Have a discussion about how it's good to give to causes we feel close to. Have your child pick a charity that is meaningful to them and when they have saved a target amount, go with them to make the donation. A great starting point during the holidays can be to have your kids buy gifts suitable for children their own age and drop them off at toy drives for children less fortunate than they are.
Encourage the entrepreneur in your kids to earn money by organizing a garage sale, hosting a lemonade stand or selling their old toys and games online. Not only will this allow them more money to spend, save and give, they will also learn about income and expenses. Give them the opportunity to earn extra money by doing larger chores, such as cleaning windows or clearing snow.
This is the time to have your children take on more financial responsibility and learn monthly financial management.
1- Start A Budget
Help them draw up a budget of their income and expenses. Let them know exactly what their allowance needs to cover (e.g., fun clothes) and what you are willing to pay for (e.g., school clothing). In the budget, help them to save towards big-ticket items, such as trips, running shoes or a laptop by working out how long it will take to save up for them. Take the time to discuss the family’s finances with them at length and show them your budget - including all monthly expenses. This will give them a good understanding of how much it costs to run a household.
2 - The Billpayer
Give your kids responsibility for paying some bills. This could be their cell phone bill and a percentage of home internet costs. Have a date they need to pay it by and consider cutting it off if they are late in paying to provide important lessons about paying bills in the real world.
3 - Part-Time Employment
Encourage them to get a part-time or casual job. Children can work in Alberta from the age of 14 in a wide variety of positions, including a clerk in an office or retail store, delivering flyers/newspapers or certain jobs in restaurants. Once they’re earning, help them to set up savings and no-fee chequing accounts, introduce them to electronic banking and pay their allowance by e-transfer.
4 - Save For Education or Travel
Introduce them to saving for big, future goals. If you haven't already set one up, bring your child with you to open a Registered Education Savings Plan (RESP) for them. They'll learn about tax-sheltered savings, investments and how the government will add up to 20% extra to their savings. Encourage them to put a percentage of their earnings in the RESP every month.
5 - Responsible Credit
As they get older, talk to them about credit. You could buy them a pre-paid card and have them use it as they would a normal credit card, so when they reach 18 they will already be familiar with how credit works.
Whatever their age, allow your kids to make decisions about how they spend their own money and the consequences of how they spend early on in life, when the amounts are fairly small.
Helping you to get started
Bring your kids into your local branch of First Calgary and open up their first savings account, chequing account or RESP. Being there during the process will make them feel like they own their own accounts and will give them a taste of managing finances for when they grow up.
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