What age did you get the ‘money-talk’ from your parents? Did you have one at all? I’m that stage in life when you start to mumble your age and develop an obsession with sunblock, but I’m still waiting on one from mine. As for my colleagues, a quick office poll revealed that, 75% of us didn’t get the money-talk; and the 25% of us who did were the enterprising sort – one got the money talk at 9 after his mother discovered that he hid half of his lunch money under his mattress (for his future car he said), and another at 11, when she decided to open up a neighbourhood cupcake business.
What’s funny is that about 75% of teens polled said that rely on their parents for money management advice. And in a Children’s Psychology study, Dr Joseph Cilona found that, even ages 9 and 11 are a bit late to start talking finances with your little ones, because by age 7 much of our attitudes – about savings, credit, needs vs wants and our very sense of empowerment, or lack thereof, is established. So get started early, and be confident and consistent.
Many of the parents we talk to everyday are hesitant to talk money with their children because they lack confidence in their own handling of money, but nobody’s perfect so if you’re waiting for that picture-perfect moment, guess what? It doesn’t exist, you just need to start. And we’re arming you with 6 tips to help you do it.
When should I get started?
“You start the moment you drive home from the hospital,” says Mary Hunt, the author of Raising Financially Confident Kids. Have the money talk early by working it into everyday activities. Let’s say you’re reading ‘Jack and the Beanstalk’, no doubt the scene where Jack’s mother finds out that he swapped the family cow for beans is a good intro to a talk on value and want vs needs. We’re in the age of online banking, but you ought to stop by your local branch from time to time with your children so they get an idea of the importance of saving, early in life. And try to pay cash when you go shopping with them, stacks of bills are much easier for children to wrap their minds around that the seemingly magic card in your wallet.
Teach them about earning money
Now this one is a bit controversial, but here’s our argument for an allowance – it’s an excellent way to teach your children that you’ve got to work to earn money. No points… or cash for keeping their room tidy, that’s pretty basic. But tasks like washing the dishes or the dog, raking the lawn or watering the plants could all earn them an allowance (and you some time to put your feet up). Give it to them once a month just like most paycheques.
Money is finite
Yes we know what you’re thinking, the first trip to the grocery store after ‘pay-day’ is going to be a cookie and candy fuelled spree. But that’s when you allow your children to make a mistake and learn from it. Not only will they tire of the candy after a while, but they’ll realise that if they go on a bender every time they’re paid there’s nothing left for week 2, 3 and 4. And there are trade-offs because that new video game or shiny blue bicycle will be impossible to save for if they spend the money they could be saving for mid – long term goals on impulse buys.
Learn to say ‘no’
Those two letters are hard for a lot of parents to say, but it’s necessary. If your little ones have spent all of their allowance and come to you for a loan, that’s your chance to explain how money management can keep them out of racking up unnecessary debt. For non-allowance related money requests, say, ordering a pizza when there’s left-overs in the fridge, don’t just say no, and never say we can’t afford it – that just makes kids worry. Say we’d prefer to skip the pizza so we can save for the family trip this summer for example, explain the need to set priorities and budget accordingly.
The 3-Jar Method is a great way to teach your children how to budget, it’s not easy for young children to think in the abstract so explaining principles like budgeting isn’t straightforward. Make it something concrete by saving 3 large jars, and labeling each one ‘to spend now’, ‘to save for later’ and ‘to help others’ they’ll experiment on their own with allocating different proportions of their money into spending, saving and charity and discover the advantages and disadvantages of their decisions along the way. After they’ve saved $1,000 it’s time to give us a visit to open a Save2Grow account, it teaches them the importance of putting away their savings somewhere secure.
Let your children reap the rewards
At the end of each week give your kids the option to use money from their spend jar, and at the end of every quarter take them to your branch to add the money they’ve saved to their account. When they hit their savings targets give them the option to withdraw the money they need and use their own money to buy their goal item (here’s where you explain that they could also choose to keep it saved for an even bigger goal down the road). Twice a year let them give the money they’ve saved in their ‘to help others’ jar to their favourite charity. You’ll get a kick out of the pride on their face when they make their purchase or donation with money they have earned and saved.