Lessons to teach your Kids about

Money

With schools back in session, it’s a goodtime to consider how we can help kidsacquire the money smarts needed for lifesuccess. Schools may provide some form offinancial literacy, but parents can play themost influential role in this area.

That’s because unlike teachers, parents candraw on many real-life opportunities tohelp their children gain foundational

financial skills. So, for all the parents outthere, here are my tips for raisingmoney-smart kids:

Introduce children to budgeting basics :

Once children reach an appropriate age,help them understand the role ofbudgeting in responsible moneymanagement. Depending on the child’s age,give them the opportunity to earn some“income” (e.g. from delivering newspapersor an allowance for performing housechores).

Ask your child to create a budget detailinghow they’ll spend this money, allocatingfunds for things such as their dailyspending allowance, snacks, entertainment,savings and donations to a favorite charity.

Give your children some freedom to makethe decisions on how to assign and spendthe money, but ask them to keep a journalof their expenses. Go over the journal withyour child at the end of the month, usingthis opportunity to discuss what theylearned and any areas where they can dobetter.

Spark a savings habit early in life :

When it comes to teaching your child thevalue of savings, the best approach is toget them started on saving towards apersonal financial goal. For example, yourchild may be interested in a new video

game or they may want to make a tripoverseas with their school drama club.

Once they’ve established a realistic goal,let your child decide how much theywould like to set aside regularly in savings,either from their personal allowance orother sources of income such asbabysitting.

Open a dedicated savings account for yourchild and cheer them on as they worktowards achieving their target. Celebratewith them when they achieve their goal –this personal accomplishment will serve asstrong motivation for a lifetime of savings.

Teach your kids money does grow – albeitnot on trees :

Maybe you told your kids money does notgrow on trees, but they also need tounderstand that money saved can growsignificantly through the principle ofcompound interest (interest earninginterest).

Parents can teach this without getting intocomplex calculations. Ask your child howthey’d fill a city block with corn crops,starting with only three grains of corn. Ifthey say that’s impossible, explain how the

first plant will produce several grains thatthey can replant. If they keep replantingeach harvest, the entire block would soonbe covered with corn crops.

Explain how the same principle applieswith your child’s RESP (you can show thestatements to your child and explain itvery simply). Or, even better, invest in amulti-year term-deposit to be used inpurchasing something your child desiresand track the growth in value over time.

Show them how money protectsvaluables :

The final money basic you want to teachyour school-aged child is insurance. Giventhat driving around in the family car issuch an everyday practice, parents can usetheir auto insurance policy to introducethis concept.

Define insurance to children simply as away to use money to protect and replacevaluables. Review your car insurance

policy with your child and teach them themeaning of key terms such premiums,deductibles and coverage.

Explain how this applies to other types ofinsurance, such as on your home orcontributions to the Medical Services Planfor health care. The more practical you canmake your lesson, the better. Educatingyour child about money has to be acontinuing process but by focusing onthese four areas, you can sow the seedslong-term financial well-being and futureprosperity.

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