Want to Teach Your Kids about Money?
Posted by Gail | Filed under Kids & Money
Parents have had a very “do as I say, not as I do” attitude to teaching their kids about money. Hey, when does that ever work with kids?
If you want your kids to be smart about money, you have to demonstrate to them what smart looks like. Just talking about saving is as effective as telling them to clean up their rooms. So how do you go about showing your kids what good money management looks like?
Give them money to save. Yah, that’s an allowance. And set the expectation that savings is something you do right off the bat. Don’t ask them to save 50% of their allowance. Are you saving 50% of your income? Set realistic expectations. You can use the 10% rule as a guide. Once your start your kids on an allowance, keep your hand out of your pocket!
Shop with a list. This is a great way to demonstrate that you have a plan to buy something, and you are only buying things in your plan. When you’re heading out the door, suggest that your kids make a list for things they think they will be buying with their money. If they see something that really grabs their attention, suggest that they put it on their list and you’ll return the following week to get it. Yes, it’s a little extra work, but it’s your job as a parent to do the extra work that teaches the important lessons, like the one about not impulse shopping.
Don’t spend money you don’t have. Sounds obvious, right? But parents are skilled at sending mixed messages to their kids. When they ask for something in a store, we tell ‘em we don’t have the money for that. But then we pick up something we like, say something dumb like, “I really shouldn’t” and pop it into our carts.
When you use plastic to shop, let your kids watch you pay the bill when it comes in. The idea that plastic has no consequence is one belief that has stuck with a lot of young’uns. They see parents whip out their credit cards to pay for things but they never see how the credit card gets paid. You want to tie the shopping “behavior” to the payment “consequence” so kids can clearly see the connection.
August 21, 2012 at 6:31 am
I like your idea of having them create a list of things they want to buy. I would also have them create a budget every month, so they can separate how much they want to give, save, and spend.
This will help them to think about what they want to do with their money ahead of time, and allow me to teach them that they can’t spend all the money they make.
August 21, 2012 at 6:58 am
Yesterday was my son’s very first money day. We went to buy him shoes for school and we went to the bank first to withdraw a $20. I told him that Daddy goes to work and gets paid for the work he does and then we can take that money to buy the things we need, like shoes, and sometimes the things we want, like a bucket of sidewalk chalk. He doesn’t understand money concepts like price or that 7 coins might be less money than 3 coins but at least I got him started. I’m going to wait for him to ask for an allowance before I give it to him but I figure he’ll see kids spending money at the cafeteria soon enough.
I knit him a little coin purse for his coins and told him that money is very important, he has to watch it, keep it safe (corner of the sock drawer) and not lose it. I think this has a double meaning for both the physical coins and the abstract concept of “money”. Not sure how to address the CC issue since we use it for everything in order to get points. We do pay it off every month and redeem the points for gift certificates.
August 21, 2012 at 7:00 am
I wish I had been taught some of these things as a kid. I had an allowance but was not required to save, donate or spend it on my stuff alone. It was like free money. I’ve needless to say worked hard to learn but it hasn’t been easy. I am aware that I was only taught what my parents knew so I don’t fault them. I certainly would do different with my children.
August 21, 2012 at 7:33 am
We gave our daughter an allowance large enough to cover her swimming, guide dues, skating, etc..plus enough for saving and spending. She had a system of envelopes in which to break up the money.
August 21, 2012 at 9:12 am
My girls were started on the Gail system a couple of years ago. It’s great when there is some fundraising thing at the school and they know that the money in their care and share jar is used for that. They also know that if they have a book order they use their fun money. Ice cream outings, that’s up to them. My oldest daughter has a jar for a new backpack when her old one gives out. It also makes the hand me downs much more attractive when they know that it will be their money to replace something.
I don’t have to say no to things, they make their own decisions. Unless it is junk food before lunch, that’s a no.
August 21, 2012 at 10:10 am
Some great ideas! I have to get my kids into this habit.
@mybabyjohn – how old is your daughter if you don’t mind me asking? I am just wondering at what age to hand over the reigns a bit.
On a different note about the credit card, can anyone recommend (or tell me how to find) a non-fee credit card with some good benefits, say toward travel? I was offered one by our bank but the annual fee is $120!
August 21, 2012 at 10:11 am
One more question – is a 4 year old too young to start on an allowance?
August 21, 2012 at 11:24 am
Having a baby motivated me to manage my money properly like nothing else could. She’s only a year and a half old so I don’t give her an allowance yet. But I will start shopping with a list so that I have the habit established by the time she’s old enough to understand whats going on in stores.
@Mees, I would give a 4 yr old an allowance but I wouldn’t expect them to budget for their guide dues and their clothing right off the bat
August 21, 2012 at 11:29 am
ING currently has a promotion that if you use a friend’s orange key and open a bank account with a minimum of $100, they will give you $50. This promotion does expire at the end of August.
Feel free to use my orange key – 17035926S1
They have a TFSA – current rate is 1.4%
Their saving’s account only has a rate of 1.35%.
Their chequing account has a rate of 0.25%.
They also have a children’s account with a rate of 2%! That’s the highest rate I’ve been able to find. I set up my son’s account as a joint account so that I have access to it (to deposit money). In one month, he earned more interest that he had with TD Canada Trust in over a year.
Yes, I would receive the bonus as well, but please know that you would be helping out a single mother.
August 21, 2012 at 12:31 pm
My sister got a wakeup call a few years ago when she asked her then 3 year old what she wanted for Christmas – the reply – a VISA card so she could buy whatever she wanted. Who says they don’t pay attention!
August 21, 2012 at 6:49 pm
answer to Mees….she was five when we started her off….she’s 37 now lol.
August 22, 2012 at 12:47 pm
Thanks for the info! @mybabyjohn – good to know! Although I don’t think I will be letting my daughter figure out her activities fees quite yet. I have bought Gail’s book too so will use that as a guide.
@Robyn – thanks for the info on the kids’ interest. We have ING accounts and therefore, have the orange code as well. However, we haven’t signed the kids up yet and that’s pretty good! And I tip my hat in appreciation to you – I have a huge amount of respect for single parents! I often wish Gail would put more info on the site for those parents – it’s tricky enough trying to figure out income on 2 salaries let alone 1!
August 22, 2012 at 1:28 pm
I love the last idea-showing them when you have to pay the bill. When I was a kid, I would watch my aunt get money from the ATM (kind of a new concept back then) and I thought when grown-ups needed money, they just went there and got some. I had no clue that you actually had to earn the money and put it your account etc. until I was corrected by my mom when I helpfully suggested she just got some money from the money machine when I wanted something she couldn’t afford
The part I think will be tricky as my little guy gets older (he’s now 1) is that money is so abstract now. My paycheque is directly deposited into my account, I pay my bills online, we use our credit card often to get the rewards, so very little physical money passes through my fingers in the grand scheme of things. It’s so much easier to explain money with coins and paper money (to kids and grown ups, if TDDUP is any indication!)
August 24, 2012 at 5:00 am
[...] week Gail Vaz-Oxlade wants to help you if you Want to Teach Your Kids About Money? Some great tips and advice here for all [...]
August 24, 2012 at 12:19 pm
@Mees, I found it easier to call and speak to an ING rep to set up my son’s account. As we are joint account holders, I can see the activity in his account (I was actually excited the first month as he earned so much interest in only a few days!), but I do need to use his account number to sign in to actually transfer money to his account. When I set up his account, I just put a dollar from my account in, and then mailed in the direct deposit form from the bank. So now I put the cash into his TDCT account and then transfer it into his ING account. I use my UCCB money to buy his RESP (I figure that it’s ‘free money’ and as I will only get it until he is 6, I would rather save it for him then depend on using it as part of our budget), so his bank account could be used to help him buy a car when he’s 16ish (he is only 2 now), or for University. We will talk about it and figure out what’s best for him.
I did honestly feel like I was being stupid for keeping his money in the TDCT account for almost two years before opening his ING account. I honestly made more interest for him in a 10 day period with ING, then all the time I had his TDCT account.