Teaching Children to Manage
Their Money

With social networks and the Internet, our children are constantly being encouraged to buy products they don’t really need. It is therefore essential to initiate them at an early age to money management to prevent them from making mistakes when they’re older. According to the experts, we can start talking to kids about money as of age 3. Of course, for a lesson to be successful, it must be adapted to their age. Here are a few tips that will help you educate them as they grow up.

From 3 to 7 years old: Learning through play

It’s widely known that children learn better through play. Many daily life activities can help initiate them to financial management while having fun. For example, you could:

• Play board games that include certain financial concepts like Monopoly, Business, Pay Day, the Game of Life, role playing games like running a grocery store or restaurant or could also play educational games on consoles such as the Wii, Xbox or PlayStation.
• Give them a weekly allowance ($5 to $10) so they can learn how to save and spend within their means. At the same time, give them a piggy bank for their money.
• Teach them to respect a budget when you do the groceries by only buying the items on your list. Are the candies near the cash very tempting? Don’t give in. Leave them on the display case. Without even having to explain, your kids will understand the difference between wanting something and actually needing something.
• Set the example! Your actions speak louder than your words.

In any case, talking about money regularly will send the message that it is not a taboo subject.

From 8 to 12 years old: Learning to save

• As your children get older, give them tips on how to save money. For example, teach them how to take advantage of in-store or online promotions.
• Ask them to bring back the refundable bottles they collected from family and friends to the grocery store. They will quickly learn the value of money!
• Foster their entrepreneurial spirit by encouraging them to babysit or have a garage sale.
• Get them involved in family decisions such as whether to take a camping vacation or an expensive trip to Florida.
• Take advantage of rising prices and inflation to teach them to compare before buying.
• Let them make mistakes. It’s better they regret buying a $5 toy with their allowance than a car as an adult.
• Every time they want to buy something, help them differentiate between a need and a want by asking, “Do you really need this?”
• Show them that it’s possible to spend their money on fun stuff and still be careful with their savings: they can enjoy a night at the movies without necessarily spending extra money on treats, drinks or popcorn.

From 13 to 17 years old: Becoming more responsible

Your teens should be getting more spending money, but also become responsible for some expenses. Since they will probably also start working part-time, they will need to learn how to budget.

• Open a bank account for them with a financial institution. Help them monitor the transactions made, including deposits and withdrawals.
• Whether it’s an electronic device or an item of clothing, encourage them to set a savings goal so that they can buy the item themselves, or at least pay for part of it.
• Teach them how to budget: make a list together of their sources of income and expenses. At the end of the month, discuss which purchases they are proud of and which they regret. Seeing where their money goes will help them manage their spending next time. You can download an activity that will help them make a budget.
• Discuss money without embarrassment. Tell them how much your house costs, your car costs, the grocery bill, their favourite gadget, etc. This will make them realize the value of things.
• Warn them about the dangers of paying with credit: in Quebec, a credit card can be obtained as early as age 16 with a co-signing parent. As children are less and less exposed to cash, they need to know early on how to use a credit card properly to learn how to stay out of debt.

18 years and older: On the way to self-sufficiency

• If your teens have a loan, remind them that they will have to pay it back after they graduate. Also, mention the importance of paying off debt quickly. If you have contributed to a Registered Education Savings Plan (RESP), you can help them pay for their education and related expenses. But limit your help so that they do their share. This will help them learn to accept the consequences of their choices.
• Explain to them the advantages of a tax-free savings account (TFSA).
• As soon as they start their first job, analyze their first pay slip together and explain the difference between gross and net salary, the various deductions and contributions, as well as the scope of their pension plan.

As you can see, learning about money takes several years. But the earlier you start with your children, the more they’ll become savvy consumers who can control their choices. Because let’s face it: having good financial habits goes beyond simply knowing how to control your spending. Managing money well means keeping control of your life, living within your means and making the right decisions that ultimately will impact your happiness.