It is shocking that kids today can get all the way to university without taking any course on personal financial management…in fact, if it’s not elected in university, it can be avoided completely. I’m not talking about a high school economics course, I’m referring to real life, how to manage financial decisions when you are no longer part of the family nest. Most university students are mailed “instant” credit cards upon graduation which is one of the worst times to receive an offer because it’s probably when money is needed the most. Getting into debt either during school or deepening one’s dept obligations after school is a difficult start to life.
I believe there is a great opportunity to teach our kids about money and make it interesting and fun along the way. For young ages of 2-5 years, use opportunities such as grocery shopping, playing store, or going on a trip to the bank (not just the machine but the teller as well), as disguised teaching moments to talk about money itself and how much it costs to buy things. Even if it feels like kids are too young to grasp the concept, it is the continual talking about money that gives children knowledge and confidence that builds over time. Older children can participate in their school supply shopping and should be encouraged to make choices based on price/need/want.
I’m a big believer in allowance because kids cannot learn to manage money unless they have money to manage. So the sole purpose of allowance should be to teach. Some parents tie allowance to chores, and really everyone needs to make their own decision for their family. I prefer to consider chores as part of being in a family, and perhaps letting “extra” work/chores be offered for additional allowance for those entrepreneurial types. The appropriate age for allowance depends on the child but in general, there should be good counting skills and basic addition/subtracting concepts (approx. age 6) otherwise kids get frustrated.
I also like the 3 jar method of allowance. Jars work great because kids can actually see their money. First jar is for SAVINGS (this can later move to a bank account to teach about interest), the second jar is for SPENDING (parents need to lay out the expectations for this amount i.e. kids need to buy their own socks and underwear and remainder for what they wish). By the way, one of the best lessons can be made from mistakes if a child “blows” all their spending money on candy and then later cannot afford to go to a movie, this will be a hard lesson but a great one in money management. As tempting as it could be to give some extra money, let this lesson be learned the hard way because real life works like that. The third jar is for CHARITY and this is where the child can have full decisions as to what to do. Kids really get empowered by this jar and feel great knowing they are helping others.
Kristine Douglas, CFP is a mother of two daughters aged 5 and 2. As a Certified Financial Planner, she coaches and advises her clients on building their wealth and financial security. She has a particular passion for teaching parents money skills which can be passed on to their kids. Kristine grew up in a family that was very open about money and money management so it was second nature for her to build a business of providing advice and counsel to clients. Kristine has provided TV interviews and talk shows on CBC’s The National, Newsnet, and iChannel. By combining her two passions of life coaching and investment management, Kristine’s unique approach to financial planning has brought much success and peace of mind to her clients’ lives.
Ask Kristine a question in comments, below or send it to email@urbanmoms.ca.
Love the 3 jar approach, Kristine! I’m definitely going to start that as my kids having been mostly spending their allowance on candy. Thanks.