It was the day after Halloween when my five-year-old daughter had an ‘important’ question for me: “How many more days until Christmas?” she asked. “It is still almost two months away,” I responded. She stood her ground, hands on her hips, clearly not satisfied with this news. “Okay then, what about Easter?” was her follow-up. “Even longer!” I said, laughing at her persistence.
I knew that motivating her questions was a new toy she had her eye on - she was trying to figure out when the next opportunity for gifts was (if a five-year-old could get a credit card, I have no doubt that my daughter would max it out on LOL dolls, Barbie, American Girl doll accessories, every surprise toy imaginable, and a collection of slime). And it also got me thinking about what I can teach my daughter about money and the lessons I can incorporate as she gets older in order to raise a money-savvy child. That night, I put together a plan, and the next day my daughter and I started talking about money.
Here are some ideas on how to teach your children about money at various ages:
Ages 5 to 6
Counting and making change. Although we are using cash less often these days, counting coins and bills is still a great way to introduce children to money. My daughter empties her piggy bank and sorts her coins by sizes. We talk about how many cents each coin represents.
Introducing an allowance. There are many ways to design this and you can do what works for your family. I started giving my daughter a weekly amount based on her age, and she quickly learned that you can’t get much with only a few dollars!
Talking about money. It’s never too early to start talking to your child about money, even in the most basic sense. Keep the conversation simple. Explain concepts of why you earn a salary and what expenses have to be paid every month.
Ages 7 to 8
Opening a bank account. Make sure your children come with you to the bank to open their first bank account; maybe they will even have some allowance saved to make their first deposit!
Spending versus saving. The concept of saving can be challenging at any age, so why not get them started early? Try a disciplined savings approach, maybe 20 percent of their allowance and cash gifts go directly to their savings account.
Comparison shopping. Take your kids with you when grocery shopping. Get them involved with purchases. Maybe there is an item on your grocery list that has a bulk option, generic, or organic version, for instance. Your kids can help you compare the options, quantities, and features to make the final decision on what’s the best bang for your buck.
Ages 9 to 11
Budgeting. Budgeting is a great exercise for understanding how much things really cost and how quickly expenses can add up. But how do you get your child to do a budget? Try giving them the freedom to plan their own birthday party - the only restriction being the budget you give them.
Charitable giving. Have your child choose a charity that resonates with them, and then come up with a giving plan. For example, they may designate a certain amount of their savings to giving, or they could purchase a gift to donate over the holiday season.
Ages 12 to 14
Starting a business. In Grade 6, I started my own business as a school assignment. I sold candy, chocolate, and pizza over the lunch hour in the school gym for a week. It was a great exercise for me to learn the basics of profitability. Try working with your child to plan a business, maybe it is something they can do now (e.g. shovelling driveways and sidewalks in their neighborhood) or planning a bigger venture to pursue in their adult years.
Creating a vision board. Have your child create a vision board by cutting out photos from books, magazines, or computer images and gluing to a large poster board. Talk about the images or words they used, and how they plan on achieving these goals
in the future. If they have a swanky sports car on their vision board, it’s a great opportunity to strike up a conversation with them about the reality of how much a car like that costs.
Ages 15 to 18
Filing taxes. As soon as your child starts earning income, they can begin filing taxes. There are plenty of online tax programs suitable for completing these early tax returns.
Budgeting for post-secondary education. Involve your child with budgeting for their post-secondary education plans. Get them researching costs of tuition, books, and living expenses.
Talking about debt. Have conversations about credit cards and interest rates. A good topic of conversation would also be mortgages. Go online and work through a mortgage calculator with them so they can see how long it takes to pay for a house and how much interest can accumulate.
Investing with a mock portfolio. Warren Buffet bought his first stock in his pre-teen years. Your teenager can experiment with buying stocks through a mock portfolio. Have them track stocks on an excel spreadsheet. Day one could represent their purchase price, and they can track their choices over several months to see how their picks perform.
As a parent, I would do anything for my daughter. And with her giant eyes and adorable smile, I would probably buy her anything, too. But I know I wouldn’t be doing her any favors by giving in to the instant gratification a new toy brings her. Instead, we talk about money, and I answer her questions about money, too. I’m committed to doing my part to build the foundation about money, so my daughter can grow up to be in control of her finances and have a positive and healthy relationship with money... But first, maybe I will roll up my sleeves and help her make some slime.
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