Teaching children about money can seem like a daunting task, especially if it’s not a skillset you have necessarily perfected yourself! But breaking down the core concepts of money and finances into real, tangible lessons for our kids will help them build their confidence around money, so they can have a head start in their financial life and hopefully avoid the same “bumps” we might have run into ourselves.
Ages 4-6
What is Money?
In the early years, it’s important to focus on the core concepts of money, the physical qualities of different coins and bills and their intrinsic value, and the exchange of that money for goods and services. Try making a game of it to keep them interested.
It may seem strange to think about teaching financial planning to a pre-school aged child, but the earlier you start to instill these concepts, the easier it will be to build on them in later years when their financial decisions have bigger consequences.
Ages 7-12
Earning, Saving, and Spending
As kids grow older, you can introduce a bit of independence to their finances so they can learn lessons on their own, while still being able to supervise and limit their decisions to what you deem appropriate.
The concept of how to earn money is important to get across to children, because it not only teaches them that they have some control or ability to earn more if they “work” more, but also it emphasizes the idea that their work is valued, which can be an essential building block to their self-esteem as they grow.
Giving an allowance is one method that many parents use to distribute money to their children, but it is vital to link the allowance to something the child can produce or accomplish, such as a certain set of chores or completion of homework on a particular schedule. This will help to reduce the chances of a child seeing the allowance as an entitlement rather than earned money. Another suggestion would be to present additional ways for a child to earn more money such as optional chores they can pick up on top of their set duties.
Once a child has some money to spend, their natural “money personality” might start to come out. Some people are natural spenders, some are savers and others are natural sharers - and kids are no different. Try to explain the concepts of trade-offs as your child is making decisions on how to spend their money by highlighting what they might be giving up by making a particular purchase. That video game they said they wanted? Well, it is going to be a long time before they see that if they continue to buy snacks every week at the corner store!
Ages 13-17
Budget-Don’t Borrow
A child’s earning potential is starting to grow in their early teens, and they also have more freedom to make unsupervised purchases. It will be important to check in with teenagers about their finances, especially if you are not able to view their bank account.
Are they missing out on activities because they have not budgeted and saved as they ought to? Are they asking you or other adults for the funds and promising to pay it back? Discussions with a teen about budgeting and tracking spending are not going to be the most fun but building a simple system for them to monitor and control will help build their skills and confidence around finances. Budgeting apps and websites are a good way to introduce these concepts, especially to older teens.
If your teen is asking to borrow money, it is crucial to ensure they follow through on repayment so they can understand the consequences of borrowing money. Set up a repayment schedule for your teen to pay you back, and gently encourage them to stick to it with their budget. Repaying borrowed money is a lesson to teach at this age because it won’t be long before a bank will be giving them a credit card, and then your child’s financial decisions will have a lot more consequences attached!
For more financial literacy resources for children, the Financial Consumer Agency of Canada has a great library of resources for adults, families and children looking to improve their financial skills.