Raising Financially Savvy Kids
Hearing ‘no, we can’t afford that’ is a common mantra in many households living on a limited budget. But is there a way to teach kids about money without making it seem like there’s never enough?
I have been going to a Living on Less series in my community the past few weeks and the topic of finances was one of the first addressed, and rightly so. But what interested me more was that the expert speaking that day explicitly said that by the age of six, kids should have some control over their own money and have a sense of the family budget.
When Is the Right Time for an Allowance?
I have read many times that parents should not tie household chores to an allowance as it gives kids the impression that people need to be paid for everything, an idea that backfires when parents need help with a big project like packing boxes before a family move. What is important however, is giving kids a chance to manage their own money.
We started allowances with our kids in grade one, as they were working with money at school and they had a hard time identifying all our nickles, dimes, loonies, toonies, and the now obsolete penny. We paid them a hefty 3 dollars every two weeks and they needed to split it three ways: $1 donation, $1 savings, and $1 fun money. By paying them in change, they learned how to work with different amounts and by the end of grade two, they could make change better than most teenage cashiers I’ve come across in the stores.
But something else happened. That three dollars gave me the financial freedom to say ‘no’ to my kids’ requests for the latest do-dad their friends had, but it gave them the power to say ‘yes’ if they wanted it bad enough. They had donated money to spend on the school book fundraiser, they could buy at treat at the store and they could save toward the latest Lego kit they wanted. All of this happened without me having to say ‘no, we can’t afford it’.
Should Kids Know How Much Money Parents Make?
As part of building a family budget, parents may wonder if they should protect their kids from the financial inner workings of their family, mainly to prevent worry. Unfortunately, when we do that, kids do not learn until adulthood how finances work. What does happen when kids see how much is spent on food, transportation, entertainment, utilities, housing, and savings, they see how the money is spent. It is also healthy for kids to see their folks making payments on debt a priority.
That does not mean that kids need to know whether their parents are making six figures or living on just enough, but what they can learn is how the money is managed. Rather than hearing ‘we can’t afford it’, by looking at the budget together kids can see where the money is going, and feel secure knowing that there is enough to cover the needs of the family.
I think the biggest lesson I learned during this financial session was that being able to talk about money in ways that are positive and empowering for kids, lays the foundation for raising financially savvy kids, who ultimately become financially savvy adults. What parent doesn’t want that?