The Perfect Age to Teach Your Kids About $Money$

Peter Katevatis - May 11, 2016
I often get questions from clients and friends that are variations on “When should I start talking to my kids about money?”  My answer is usually something cheeky like, “Yesterday.” From infant to teenager there is always something to be taugh

I often get questions from clients and friends that are variations on “When should I start talking to my kids about money?”  My answer is usually something cheeky like, “Yesterday.”

 

Teach Your Children About Money

 

From infant to teenager there is always something to be taught with regards to earning, spending and saving.  Children do not learn money management at school (possibly due to a Canadian banking conspiracy) so parents must teach it to them.

As a financial professional and parent here are some tips to help you with each age range:

 

Infant – 2 year old

  • Explain the toy or cookies they are holding in the store are not theirs until purchased
  • Discuss the parent’s job and earning money to buy things (even if you get blank stares)

3 year old – 5 year old

  • If children have birthday cash, let them spend it themselves.  Watching a 4 year old weighing the pros & cons of a purchase is priceless
  • Use a piggy bank to explain savings, if over $100 start using a bank account.

6 year old – 9 year old

  • Explain saving for “large ticket” items and parent fund matching depending on purchase
  • Start planting the earning seed with household chores and duties, no “free” allowance
  • Discuss charity and have them choose a cause to support

10 year old – 14 year old

  • Simple math: Net Worth = Assets – Liabilities 
    • To increase your net worth you need to increase assets, lower liabilities, or both
    • This is the first step of your personal Balance Sheet
  • More math:  Income – Expenses = Savings
    • Separate expenses between wants & needs
    • Start building your personal Income Statement

15 year old – 19 year old

  • Start a live monthly budget.  Track earnings and expenses to monitor progress
  • Explore investing your savings, let them buy shares in companies they support
  • Discuss post-secondary plans from a budget viewpoint, keep them part of the process

All of these steps will empower your children to make wise decisions in the future.  You might have the best intentions when you make decisions on behalf of your child, but you need to “teach them how to fish”.  The more candid you can be, the better they will be equipped to make their own decisions.

 

Another benefit of these discussions and exercises will be your relationship with your son and/or daughter.  You will get an inside look at what motivates them and what their passions are, hopefully there is both.