Help children understand the initial concept of saving with visual aids such as labeled jars of money or cans (Getty Images / Peter Cade)
Some parents wait until their children are near their teens to start teaching budgeting. But experts will tell you that you can start laying the groundwork at a much earlier age.
“It is so essential, especially at a very young age, to expose children to very simple financial scenarios,” says CPA Roshan Quraishi, financial consultant, William Osler Health System in Brampton and financial literacy volunteer. “If you develop the knowledge at an early age, it will pay huge dividends.”
FROM THREE TO FIVE YEARS OF AGE: TEACHING THE BASICS OF SAVINGS AND SPENDING
Lessons don’t have to be complicated at first. CPA Leigh Sindlinger, accounting manager at Bell Lumber and Pole in Vernon, BC, often teaches kids budgeting in school.
“There are different aspects to budgeting. Sometimes it’s about figuring out how much something costs and whether they have the money to pay for it, ”she says. “As you get older you start to incorporate other things, like saving for something bigger that they can’t buy with a month’s allowance.”
While there are many great financial technology apps and tools out there, the proven concept of the piggy bank is still a great way for young children to learn how to save. “You can design your own,” Quraishi explains. “Get some cans [or jars] and make labels so they can invest money to spend, save and share.
CPA Jean-Marie Chan Kin, founder / director of Money Coach JM in Toronto, says you can start having jars of money for kids as young as three. “You want to teach them that money is not infinite,” he says. “They can see it grow when they save and decrease when they spend.”
Quraishi also started teaching his five-year-old son some very simple concepts by sitting down with him and making shopping lists. “I show him the list of what I want to buy, and then we do some quick research to find where I can get the best price,” he says. “Savings apps like Flipp are ideal for this. ”
FROM 7 TO 8 YEARS OF AGE: OPEN A BANK ACCOUNT
“Start with a basic savings account,” Quraishi explains. “Then consider getting other accounts when they get older. Make sure that whatever account you open there is no service charge.
When you’ve opened both a savings account and an expense account, you can overlay more concepts. “My rule of thumb when teaching children is to try to put at least 10 percent of the money they receive into a savings account,” Sindlinger recommends.
There are also some fun and easy ways to teach kids about investing as they get a little older. They can put a portion of their savings in a GIC or in a single stock and find out what happens when it goes up and down, says Chan Kin.
12 YEARS AND OVER: REAL MEETING
Sindlinger often tells the story of an important life lesson his mother taught him when he was 12 years old. I’m not buying you anything anymore. I learned to fit my budget throughout my teenage years. It was a huge learning experience that I started with my daughter at the age of 12. ”
Another important lesson when working with students is to instill the impact of cash, she adds. “It’s really important to understand this emotional attachment to money. When you buy something and use cash, you feel this loss: I give you my $ 10 and I don’t have it anymore. You just don’t understand this when you’re not working with money.
Chan Kin offers one final financial literacy tip: “Be a role model. Children learn from what they observe.
CONTINUE THE CONVERSATION
To help kids learn everything from the cost of owning a pet to managing a credit card, check out CPA Canada’s free financial literacy workshops that you can download anytime. You can also get a copy of the CPA Canada book Raising smart kids.
Plus, try to introduce technology into your weekly task board and allowance payments, and learn how to prevent your kids from making in-app purchases without permission.