The value of knowing its value at every age
Money is everywhere. As the saying goes, it’s what makes the world go around.
As parents, we want our kids to be good at managing their money, both now and in the future. But when and how do we start to teach kids about the value of money?
Short answer? Now!
A study conducted at the University of Cambridge showed kids form money habits by as early as age seven. Therefore, giving your children a financial head start by talking about money from an early age is a good plan. But don’t despair, it’s never too late to start the conversation.
Whether you’re introducing the concept of cash to a three-year-old or talking about saving for a car with your new driver, money talks and kids should listen.
Little kids and money (age 3-6)
Essentially, there are four things that kids this age should learn about: earning, spending, saving and giving. Okay, so your four-year-old isn’t going to be ready to earn for a couple of years, but money can start making its way to him or her through birthdays or random gifts and chores. That’s where the spending, saving and giving can come in.
Some people like to set up three jars for money: one for cash on hand; one for savings to deposit; one for charity. When money comes in, encourage contributing to each jar. By seeing the coins add up, the concept of saving takes hold.
It’s also a great time to explain how you pay for things, what a debit card is, where the money comes from. And, as usual, be a good example by avoiding impulse buys. Talk about how much things cost and how you will save to buy a bigger item.
School-age kids (age 7-11)
By this age, allowances and chores have probably come into play. Kids will know that parents work to get money and there are different ways of spending, such as buying smaller or bigger items, putting things on credit or paying cash. Discussing the distinctions lays a good base for speaking about budgets in the future.
This is the time to talk about needs and wants and short- and long-term goals. And, when it’s appropriate, open a savings account and talk about interest but perhaps keep waiting on the chequing account and bank cards for now. Encourage playing board or video games that involve money.
Support your child as they purchase items but present all sides of any decisions, then step back and allow them to make mistakes or have regrets. Encourage your child to wait at least a day before making any purchases over $15 and help them come up with a pros and cons list.
If they want more money, come up with specific chores that provide that opportunity. And keep instilling the idea of giving to others. If they can see the effect of their charity, it will make them realize they’ll feel good about it rather than begrudge it.
Early teens and mature tweens (11-14)
This is when kids start really feeling the pressure of wanting what others have. And though it can be painfully annoying, discussions should occur about why others get to have things that they don’t. Try to take the emotion out of it and offer rational justifications and solutions.
Discussions about budgets and credit should begin in earnest around this age. Keep track of expenses and talk about short-term goals, such as buying gifts at Christmas, and longer-term goals like saving for a holiday or a large purchase like a phone or bike.
If they make mistakes, don’t bail them out.
Teach them how to be content with what they have and show them we all must settle at times to stick to our budgets. Sure, a new car is awesome, but a used car is just as functional.
Teens prepping for life (15-19)
With the first paycheques coming, the topic of taxes will hit home – and it’s another great opportunity for discussion. As well, long-term planning needs to be discussed with the prospects of post-secondary education, cars and eventually (hopefully!) moving out.
Credit scores can take a hit with the first credit card or phone plan, so make sure everyone is on the same page.
Talk about the dangers of credit cards, the disadvantages of student loans, the importance of saving for the future – essentially scare them with reality! Once they get panicky, show them a little mercy and introduce the idea of investing and the magic of compound interest.
Money is a big deal and education is key. Be a good example, offer explanations, encourage charitable giving and show them how to be a smart consumer. It will take effort and won’t always be easy, but it will be worth it.
So, invest in that time – and your kid – and get talking about money today.