Just like any other lesson our children have to learn as they grow up, lessons about money start at home. While the approach will be different across different age groups, this is a guide on how best to handle general everyday situations and discussions. While it’s never too late to teach children about money, starting early is key, if possible. Having a clear understanding of where money comes from, saving for a big purchase, and understanding the consequences of their purchases will ultimately boost their confidence and go a long way to ensuring that they make wise decisions in the future. Chances are many of us have made money mistakes in the past (who out there can relate to a closet full of shoes that you really don’t need? I know I can!) but teaching our children will hopefully lead to fewer mistakes and a greater appreciation for planning ahead.
Lead by Example
As we all know, children pick up cues from us as parents and our actions help them determine socially acceptable norms which enable them to act accordingly. A few years ago my debit card was compromised and it woke me up to how easily our personal data can be stolen and how easily our hard earned money can disappear. I was freaked out not knowing where the breach had happened so I made a decision to switch to a “cash diet”. Instead of whipping out my debit card every time I needed to buy something, I set a bi-weekly budget and worked really hard to stick to it. How exactly did I do that you ask? Well…every 2 weeks (it coincided with paydays), I’d take a trip to my bank and withdraw a set amount that would allow me to manage my expenses for the next two weeks.
This approach works because if you’re honest about your budget you not only reduce overspending but you teach your child that you have to stick to a budget once you set it. I make sure that there’s enough for groceries, gas for the car, etc. Buying random things because they caught my eye has reduced. It made me more conscious that the cash I had on hand was all I had for the next two weeks so I was very strict with myself and didn’t hand over my debit card if I knew I was going to be short on cash. This approach only works if you’re that strict with yourself and practice discipline. Of course, spending cash means you may need to write things down to track where your money goes. It’s easier to lose track of but personally, my expenses are generally the same every month so I know where my cash is going.
This cash approach worked for me because the only place I use my debit card now it at my bank. If there’s ever another breach (fingers crossed that never happens again), at least I know exactly where it happened.
I believe this is a great lesson for Miss O simply because she sees that you only spend on what you’ve budgeted for. Of course there may be exceptions and emergencies that arise but for the most part spending cash allows you to physically see how much you have available and how much you have left. I’m hoping this encourages her to be a responsible spender as she gets older.
Activity to Try – Learning the Transactional Value of Money:
The next time you take your child(ren) shopping, let them hand over the cash to pay. If you have more than one child, they can take turns on each trip. This way you won’t have to say your PIN code out loud to them and the kids will enjoy helping you pay and getting change back.
Activity to Try – Learning the Monetary Value of Money:
Unlike American cash, Canadian cash is colourful and fun to look at. Using the colours to teach the numerical value is a great way to teach a young child their numbers as well as their colours. Alternatively, you can give you child spare change and ask them to group them by size and colour. Once they’ve created their groups, teach them the dollar value of each group.
Give Them an Allowance
This definitely depends on the age of the child. Toddlers and pre-schoolers are still too young to understand to concept of receiving money on a regular basis. While older children might expect it weekly, younger children aren’t likely to come to you and ask for their allowance. The amount you decide to give and the frequency depend on the age of your children and their expenses. Children who have just started school will probably be OK with a few dollars bi-weekly since they likely don’t need to buy anything beyond inexpensive games or books and let’s face it…candy. Older children are going to spend on more applicable items such as a new item of clothes or a movie they want to see.
You can choose for their allowance to be “free money” or the result of doing chores. Miss O is turning three soon and has her own set of super easy chores to help with around the house. For instance, when she’s finished eating a meal or a drink she knows that they have to go in the sink. She’s fairly tall for her age so reaching up isn’t an issue for her. I don’t give her an allowance yet but you get the idea, toddlers are capable of doing chores, within reason. Older children can mow the lawn, take out the garbage or do some laundry during the week to earn their allowance (see the list below of chores by age group). I once had a co-worker who gave his kids extra bonus money if they did something that went beyond their regular list of chores. For example, if they took it upon themselves to water the garden or make up mom and dad’s bed in the morning, they’d get an extra $2 that week. This might not be for everyone but at least it teaches kids that money doesn’t come from the ATM it comes as the result of working hard and earning it. By earning their own money, we can hope that they make wiser decisions.
Activity to Try – Create a DIY Chores Chart:
I don’t know about you but I LOVE Pinterest (side note: check out Glitter and Glow Mom’s Pinterest page @ www.pinterest.com/glitterandglowm/ ) and found some great ideas of easy DIY chore chart project to make at home.
Chore Sticks (an alternative to cash, kids get to enjoy activities they enjoy instead)
Age Appropriate Chores:
Ages 2 – 3
Ages 4 – 5
Ages 6 – 8
Ages 9 – 11
|o Pick up toys
o Put away books Wipe tables
o Feed pets
o Put clothes in laundry hamper Match socks from the laundry
|o All of the previous chores
o Clean room
o Set the table
o Help put away groceries
|o All of the previous chores
o Empty the dishwasher
o Water plants
o Empty indoor garbage
|o All of the previous chores
o Sweep floors
o Take out the trash
o Shovel snow
o Mow the lawn
|o All of the previous chores
o Do laundry
o Start learning to cook and make simple meals
Explain the Importance of Saving
Savings tie in nicely with allowances. Teaching kids to work on a budget and set goals is an important part of forming healthy habits. I’ve seen examples of families with three jars for kids to use (if you’ve ever watched “Til Death Do Us Part” you’ll know what I’m talking about) to keep them (and their money) organized. For example, little jars with labels that say: Save, Spend and Donate teaches your child how to spread out their money so that it can be used for multiple things, not just one large purchase. Because our family goes to church, when Miss O is a little older I plan on adding in a “Offering” jar. This is different from the donate jar in that it’s teaching her to set aside 10% of her “earnings” to honour what God has so generously given us.
This jar example goes back to my cash diet message. Young kids are too young to manage a bank account so having cash that they can see and hold will make them more conscious of how they’re spending their money. They’ll be able to see when it grows or decreases and adjust their spending accordingly. A cash diet also teaches them not to rely on credit cards later in life. We’re all aware of the credit crisis that happened back in 2008. By encouraging them to save for the things they want rather than adopting a buy now, pay later attitude, we protect them from developing habits that can ruin them if not managed properly. I remember my first week of University, there was a booth set up for credit cards and almost every new student signed up for one. They’re great for building your credit history but boy was I scared to go nuts with that money. Because of the lessons I learned growing up I only used it for emergency situations and always paid back more than the minimum when I had a balance.
Activity to Try – Make a List:
If there are things that your children would like to buy, have them write them down and hang it on the fridge. This will give them a goal to work towards so that when they’ve saved enough they can enjoy the feeling of achievement.
Involve Them in Purchase Decisions
As your kids get older, include them in discussions the family has about money. This helps them become comfortable talking about it. Answer questions they might have about money so that they understand the good and the bad. This will work wonders for them later in life, they’ll understand the importance and feel compelled to discuss it when managing their own homes and finances. On occasion I like to take Miss O grocery shopping with me (let’s face it, I like to go by myself when I can to avoid hearing, “Mommy can I have this one? It’s my favourite”, 20 times). She’s still a little too young to understand the concept of sales and price matching but I say these things to her anyway. At least she’ll be familiar with the terms so that when the concept becomes clear she’ll understand it in practice. I also let her make decisions about which one of her snacks we can buy. She’s more interested in which one looks the best but I still explain that we have a budget and can only get one this time; she chooses which one. For your older children you can start explaining the differences in price and why you might decide to pick one product over another or why quality sometimes trumps price.
Activity to Try – Shopping Assistant:
Let your child(ren) hold the shopping list and point out the items you need as you walk down the aisles. For kids who can’t read you can point out an item on the list (ex. bananas) and ask them to help you find them as you walk through the fruits and vegetables section. When they find the item, let them choose which one to pick up. They’ll love being a part of the shopping process.
Let The Make Their Own Decisions About Money
Finally, it’s our jobs as parents to teach our kids about money but we should also take a step back and let them make their own decisions. Even if they’re decisions that may result in regret or a mistake. We’ve made mistakes and learned from them so it’s only fair that we allow our kids the same experience. But within reason! They need to avoid scams and any other serious mistakes. I’m talking about allowing them to purchase one big item instead of spreading out their cash and buying a few things for the same amount of money. Once the realization sets in that they would have been happier spending their money differently, they’re not likely to make that mistake again. They’re aware of the resulting consequences.
Activity to Try – Talk it Out:
When a child expresses interest in making a purchase with their money, ask them a few questions as to why they want the item and what they might be giving up to get it. If they’re adamant, as hard as it may be, let them make that decision.