June 15, 2020
Children are often initiated to savings very early on thanks to piggy banks, so we invite you take the lesson to the next level with your kids. There’s more to personal finance than just saving! A ton of notions can be passed on to your children as soon as they’re old enough to understand, and these are valuable lifelong lessons.
To help kids become familiar with the vocabulary and the various concepts of personal finance, invite them to join you when you manage your accounts online or perform finance-related tasks.
Paying a bill online? Call your child over to show them what you do on the screen.
If you just signed a mortgage for a new house, it’s a golden opportunity to introduce your child to the concept of credit.
If you need to go grocery shopping, look at flyers with your kids before you head out. Show them the efforts made to find deals so you can save money for other purposes.
If your kids are old enough, introduce them to taxes while filing your tax return. Explain how taxes work, why we file a return, how the refund (if any) will be spent, and so forth.
Also explain that you put money aside daily thanks to a savings account, RRSP or RESP. Choose age-appropriate vocabulary to help your child understand the different concepts of personal finance.
Lead by example and teach your child to exercise judgment when exposed to advertising. The product advertised in a commercial may be relevant, but that doesn’t make it the best one out there. Explain to your child why it’s important to shop around and compare prices and options before buying something; that it’s key to always remember to focus on needs. Was this item part of a savings goal? Are your kids easily led astray from their goals simply because of an advertisement for the latest trendy toy?
Replace Allowance with Salary
We suggest a different approach to the allowance or pocket money you may be giving your child.
To teach the lesson that one has to work for income and money doesn’t grow on trees, you can simply replace the word allowance with salary. Depending on your child’s age, a “paycheck” can be earned in exchange for a successful morning routine or household chores. This will instill the value of hard work.
However, avoid falling into the trap of paying everything: children must also learn that, unfortunately, not all tasks will earn them money—it’s just part of being a big kid. Some tasks, such as making their bed, will not necessarily be counted towards their paycheck.
Discover the Magic of Compound Interest
If your children are mature enough to understand slightly more complex concepts, initiate them to the principle of compound interest. You will teach your kids the advantage of saving and, above all, the rewards of saving early on in life!
The idea of introducing your kids to these different concepts is first and foremost to engage them while keeping everything fun and educational. If children show zero interest, it may not be the right time, or maybe they’re still too young. There’s no point in insisting; listen to your children and try to pick up on any opportunities to introduce them to personal finance.