While I don’t expect my three-year-old to make her own financial decisions yet, she does like to pay for a box of Smarties or a dollar store item with her own money. It’s fun going to the grocery store with my two daughters to see how excited they get to pick out and pay for a treat at the checkout.
I’m starting to have money talks with my kids, even though they aren’t even teenagers yet. Here are some of the things I’d like to teach them about dollars and cents:
Spending their own money
By the time your kids are in school they should start learning how to handle money. I give my six-year-old an allowance of $5 per week. She has three large, clear plastic jars labelled Spend, Save, and Give. Every Saturday morning I hand out five loonies and instruct her to put $3 into her spend jar, and $1 each into the Save and Give jars. It’s fun to see how she decides to use her money.
How much should you give? Some parents use a flat calculation such as $1 to $5 per age per week or month, so a 10-year old might get $10 a week. Some families decide on what the child is responsible to buy from the money they receive, such as school lunches, and give an appropriate amount.
Also decide whether you want the allowance to be tied to household chores (we don’t). Your kids should know that there are basic duties around the home that need to be done regularly by every member of the family. Exceptions can be made for tasks such as painting the fence or raking leaves for a negotiated fee.
You can also teach your kids about credit. If they get an advance on their allowance, you can charge interest and offer a weekly minimum payment.
For kids under 10 you want them to aim for a goal and watch their money grow, so they should have just enough to buy some of what they want but not so much that they don’t have to make plenty of tough choices.
When you teach your kids about money, you need to let them make some decisions – and even make some mistakes.
Earning other income
At some point your children will realize that to afford some of the things they really want they’ll have to find opportunities to earn extra income.
Whether it’s mowing the neighbours’ lawns, babysitting, or working part-time at a fast-food chain, your kids can start bringing in some decent money with a little bit of hard work.
Parents shouldn’t necessarily interfere with what children do with their own money, but this is the
time when expectations should be set and ground rules laid down.
Some parents pay for everything, whereas some children are responsible for such things as gas if they use the family car, or contributions to family phone plan.
Help your kids set a weekly spending maximum for discretionary wants. Teach them how to comparison shop instead of buying the first thing they see at the mall. These are some of the most valuable lessons to teach your kids about money.
As soon as your child can sign their own name, they can open a chequing account. Most banks offer versions of a youth account. Parents can set withdrawal limits and restrict debit card use if necessary.
Many children get money from grandparents and other relatives for birthdays and other holidays, as well as allowances and employment earnings. You should encourage your kids to use their bank accounts to save for their high tech gadgets or other higher priced items as well as spending money for family vacations. Some parents offer to pay half of a large-ticket item, or set up a matching savings program – something I might explore more as my kids get older.
Kids might see their parents as walking ATMs, but they should at least have some age-appropriate knowledge of their family finances. Even young children can be shown utility and grocery bills. Teenagers can be given more advanced information such as a mortgage, car loan, and credit card payments. Allowing your kids to understand how you choose credit cards (and pay them off), as well as the realities of what it takes to live, can help them understand that you don’t just get to do whatever you want all the time – and that you have to make tough choices about your priorities, too. Use your discretion and be discreet about any personal information such as salaries, investments and certain spending.
Allow your kids the freedom to spend and save their money as they choose. I know it’s difficult to stop from dictating what they do with their money – like buying some cheap toy that won’t last a month – but it’s better to let them make their own mistakes now with a little bit of money than when they are adults with a lot more to lose.