It’s never too early to start teaching your child valuable lessons about money. It’s an important life skill that many of us miss out. In fact almost 6 in 10 Canadians do poorly on financial literacy tests. You can start by introducing simple concepts such as money has to be earned and saving versus spending in terms they can relate to.
Lesson A: Money has to be earned
An allowance is a good opportunity to communicate the idea that money, while never free, can be earned. Explain to your kids that their allowance is based on an agreement to help with household tasks and chores. Pay them with different coins and bills so they can practice counting money. You might also want to explain that payment can be withheld if they fail to perform as expected. One rule to go by is to give about $1 a week per year of age. Age-appropriate chores might be putting toys away for a four-year-old or mowing the lawn for a 14-year-old.
Lesson B: More money can be earned through more work
After they do their usual chores, tell your kids that they can also sometimes get a bonus for extra work that comes up that they might be able to do. If it’s not their turn to wash the dishes, but their sibling on duty is away at summer camp, you can offer an extra couple of dollars for this extra job. This shows your child that with extra effort, one can earn extra money.
Lesson C: Wants are not the same as needs
Children, like adults, want things. Whether it’s a toy or a new dress or an ice cream cone, temptation can be hard to resist. When your child wants something, don’t just say either yes or no – explain that things cost money and we have to choose between needs and wants, or save up for bigger wants. Explain to your child that the new toy costs perhaps four weeks of folding laundry – you might be surprised to see your child rethinking the purchase.
Lesson D: A penny saved is a penny earned
Ask your child what they plan to do with their allowance. Point them toward options that encourage saving, like a fun piggy bank. When the child decides to spend money, make sure they feel what they want is worth the hard-earned money it costs, or whether something else might be better in the long run. If shopping online, you might also want to explain taxes and shipping charges.
By introducing the topic of money, you are showing your openness to talk about it on an ongoing basis. Encourage questions and offer as much information as you can. The lessons you give now will last a lifetime.