Want to bring up a finance-savvy, responsible child who understands the value of money? Try these strategies to educate them from early on that money doesn’t grow on trees.
It’s almost never too early to teach your children the value of money — well, wait until they can at least count! But once they’ve mastered counting, you can start educating them about money and saving. Here are some strategies for raising financially savvy kids.
Talk about the different ways you can spend your money
Children need to learn the difference between wants and needs, so keep an open dialogue going about the mindframe you have when it comes to spending money. When you take them to the grocery store, turn that into a lesson of wants and needs. Your family needs the salad so you all maintain a healthy diet, but you don’t need the prepared one because you have time to make one from scratch (which, in turn, will also save you money). Allow them to see you comparing the prices and value of products and using coupons when making your grocery-store purchase decisions.
Give them an allowance in a way that encourages them to save
Don’t hand them their weekly $10 while at the toy shop, for example. At home, when you have time to talk to them about their money if they have any questions and when they’re not surrounded by temptation, give them their allowance in small denominations (toonies or loonies, for example); this way, they can easily put a few in their piggy bank should they choose to, while using the rest as they wish that week. Help them calculate how much they’ll have saved by year-end to help them see and grasp the big picture.
Guide them into setting financial goals
When your kid asks you to buy them a toy, you can make that into a financial goal for them. They’ll be motivated and will come to understand that putting away money is a satisfying and rewarding habit. Undoubtedly, they’ll come across something else they want (a comic book they see in the shop) and will have to make a decision as to whether they save or spend, keeping in mind this will affect their initial goal.
Let them make their own decisions
Give your child free reign to make their spending decisions — even if it makes you cringe to see them spend their hard-earned money on a cheaply made toy. Do step in and talk about the good and bad components of the decisions they’ve made and how they can make more informed buys going forward. Encourage them to research purchases beforehand (even if that simply means asking their friends how they are enjoying the new gaming system they bought) including reading reviews, looking for sales, etc.