In the past teaching children how to handle money was far simple because actual funds were used. When we watched our parents take their hard earned money and deposit it via a cheque at the bank, we understood that money was being put away.
How do you instil financial wisdom into a generation that is growing accustomed to seeing a credit card being swiped instead of the exchange of cash in transactions? With the advent of Direct Deposit and Automated Banking, we rarely if ever see actual currency in our hands.
The following is a list of examples of techniques any parent can use, according to age group.
- Explain the difference between “I need” versus “I want”. Things that we need are necessary for staying alive and healthy such as food and shelter. Things that we want are items that we can do without.
- While making grocery purchases, explain to your child what happens at the checkout counter. Let your child hand money to the cashier and accept the balance as well as the bill. Explain the value of each coin and bill in your balance.
- You might want to start an allowance at the age of 3. Keep a piggybank with your child’s name on it. Explain to your child that every coin that is saved can be later redeemed for any item of their choice.
- Take your child to the grocery store and help them purchase things on the list. If they want to purchase extraneous items, explain to them that if after paying for needed items, the budget allows extras, then the extra item may be purchased.
- Make sure you talk about how much items cost at the dinner table.
- Take your child to the Dollar Store with a budget of $5 and allow your child to make decisions about what they want to purchase. If they go over the budget explain what they can do to remain within their target.
- At this age, you can open a Chequing Account in your child’s name. Teach them how to check their balance. Explain account fees and limits on transactions.
- You might want to start a weekly allowance with your children for completing certain chores around the home.
- Explain the concept of Interest rates on bills and why it is important to pay them on time.
- The next time you have to do the groceries, have your child make a list and then let them come with you to the store.
- You might encourage your child to have a summer or part time job and save some or all of money that they earn.
- Put them in charge of a specific task such as paying the phone and television bill.
- Discuss college options with them and the fees that they entail.
- You might also want to discuss different ways of investing their savings.i.e. stocks, bonds etc.
The bottom line is that wisdom about how to handle money is first taught by parents.