Whether your kids are in preschool or have started their post-secondary education, it’s never too early - or too late - to teach them about money. While some parents have no idea where to begin, getting your kids to understand the fundamentals of financial literacy is surprisingly easy.
As soon as your kids start counting, you’ll want to introduce them to coins. First, explain what nickels, dimes, quarters, loonies, and toonies are worth. Once they recognize each coin, you can demonstrate some basic math skills, such as how four quarters make a loonie. The idea here is that you’re introducing them to the concept of money, as well as simple math.
Explain money concepts in everyday situations
Whenever you’re out with your kids, explain the concepts of money whenever the opportunity comes up. For example, if you’re filling up gas, explain to them that you need to pay for gas so the car can work. You could also explain how gas prices change daily.
Another great place to teach kids about money is the grocery store. You can go over which items you’re buying and why, and show them how items on sale, coupons, and buying bulk can save you money. Alternatively, you can give them a simple task: Give them $20 and tell them they need to come up with a meal to feed the family. Explain how they need a balanced meal that falls under that amount, so they can’t buy just junk food and snacks.
Talk about needs vs. wants
Many younger kids assume that parents can just buy anything, but that’s obviously not the case. Instead of just saying no or giving a generic response each time they ask you to purchase them, use these situations as a teaching moment.
Explain to your children that every family has needs and wants. Needs would include things such as food, housing, and clothing. Those needs need to be paid for first. If there’s money left over, then wants, such as toys, fast food, and vacations, can be considered.
Introduce the concept of delayed gratification
Delayed gratification is one of the easiest money concepts to understand, and it can last a lifetime. Explain to your kids that they can spend any money they’ve earned; however, if they save their money, they can buy things that cost more, last longer, and give them more joy. For example, they could buy candy and cheap toys, or they could save their money until they have enough to buy new shoes or a video game. The same concept can be applied to teenagers. Encourage them to save money earned for future goals, such as a trip to Europe when they’re done with school.
Give your child an allowance
Teaching your kids about money doesn’t work if they’re not making any money. Instead, consider giving them a weekly allowance based on their age. For example, a 7-year-old would get $7 a week. Alternatively, you could reward them with cash if they do chores or complete their homework. Admittedly, not every parent likes the idea of “bribing” their kids to do family household work, but the idea is that you want them to earn money that they can make decisions with. You would then be able to educate them on smarter ways to use their money.
Tell your teens how credit works
Before giving your kids a joint credit card, educate them on how they work. Explain to them that credit cards are a loan that needs to be paid back. If you don’t pay back the entire balance owed by the due date, you’ll pay high interest charges. These charges can add up quickly, and could put them into debt. You could also show them your credit card statement when it arrives. Show them how you go over each line to ensure each charge is accurate. Finally, don’t forget to explain that while there’s only a minimum amount required to be paid, they should always be paying the full balance.
Talk to them about your job and different careers
Most teenagers have no idea what they want to do with their lives, yet they’ll have to make some decisions early as it could affect their future career choices. Talk to your kids about your job. Tell them what you do, how much you make, and what it took for you to get there. You could also go over different careers with them and research together what the average salary is and what education is required.
By providing kids with knowledge about different career opportunities, they can make better decisions. They may realize that some careers may not pay for the lifestyle they want. Alternatively, they may have to take specific courses now to ensure they’re on track for a job they’re interested in.
Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. As a completely self-taught, do-it-yourself investor with no formal training, he makes money easy to understand for all Canadians. His specialties include personal finance, budget travel, millennial money, credit cards, and trending destinations.
Barry Choi is a paid spokesperson of Sonnet Insurance.