Financial independence is a critical skill for future success that your children will not learn anywhere else. Not only does financial literacy help your children have more success in life, but it allows them to move out sooner, and it avoids delaying your retirement with additional expenses to support them.
So, how do you teach your children about money?
- Review Your Attitude Towards Money: The first and most important thing is to examine your attitude towards money. Are you a penny pincher? Frivolous spender? Do you buy impulsively or take a long time to make a purchase? How much debt do you have? Your financial habits will shape your children. Parents need to consider what messages they are sending with their money habits to ensure they are setting them up for their best financial future.
- Give Your Children an Allowance: Providing an allowance to your children (especially one in exchange for chores) is an age-old way of teaching your kids about money. A good guideline is $1.00 per year for your child’s age. For a 10-year-old, this would be $10 per week.
- Teach Your Child to Save: If you give your child $10 per week in allowance for chores, encourage them to put even just $1 per week into a piggy bank. In six months, show them how much money they have saved and discuss why it is essential and what they can do with that larger amount now.
- Encourage Kids to Think Before They Buy: While getting a 10-year-old excited about an RRSP is hard, there are other ways to help them plan ahead. One is to encourage them to think about their purchases before they commit. They saw a toy on TV and have to have it – teach them how advertisements are designed to make you want something. Ask them to wait a week. Do they still want it?
- Involve Your Children in the Family Finances: It is more valuable than you might think to let your kids see and hear you discuss financial planning; let them be part of opening and paying bills or planning vacations. Explain why and how much you pay for certain things and discuss affordable choices. This helps them be part of the conversation and will work to instill a sense of financial responsibility as they grow up.
- Teach Your Children about Price Awareness: When at the grocery store, show your children the price difference between two products that should be the same. Because children aren’t thinking about costs, they typically don’t look since mom and dad are buying! Involve your kids with the budget, and ask them if they know the price of whichever toy or snack they want. For example, Shampoo. Drug store shampoo can range from $5 to $30, with all different quantities. While a low price might not always be the best quality choice, show your kids the value pack price vs. regular Shampoo.
Remember, you are the best example to your children about money. Don’t be afraid to share the ups and downs with them. Be patient with your kids, but don’t give up! The best thing you can do as a parent is to promote financial security and independence.
Trish & The Primex Team