Teach kids savvy financial skills that are especially crucial these days

Start the process as soon as your young people start asking you to buy things for them

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In today’s climate of rising costs, it has become crucial to learn savvy financial skills to balance our budgets and not rely on credit to cover any shortfalls. But it’s not only a good idea for us to learn how to better manage our money, it’s equally important to teach our children.

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You can start this process as soon as your children start asking you to buy things for them. That means they’re ready to start learning about money, but before they can spend, they need to have a way to earn it. An allowance is often the first way children receive money. Decide if you want to tie it to age-appropriate tasks or give it strictly as a learning tool. I found that tying my children’s allowance to household chores required a lot of follow-up before I could pay them.

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Depending on what you can afford and what your child is expected to do with their allowance, a weekly sum of 50 cents to $1 per year of age is a good rule of thumb. This means your four-year-old would receive $4/week and your 10-year-old $10/week.

Next, choose how you want to manage the allocation.

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It will be more of a visual lesson to start by giving them money to put in their piggy bank. As they get older and understand the concept of electronic banking, you may want to move to weekly automatic transfers to their own account or to a joint account with you.

Next, encourage your child to set a goal for something they would like to buy. It’s a great way to teach them about savings and delayed gratification, which is worth mastering before they’re old enough to get credit.

For example, let’s say the toy they want costs $29.99 plus tax. In Manitoba, it’s $33.59. Help them calculate how many weeks it will take them to reach this goal given the amount they receive from their weekly paydays. Consider creating a savings goal poster to help them visualize their progress.

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As children grow and become more interested in spending, teach them the time value of money. This aligns how long someone has to work to earn money to buy an item.

We’ve used this tactic with our own kids whenever they wanted a new item that wasn’t a necessity. It helped them understand the value of our time and that there are limits to what we can afford. If your child thinks he should be able to buy a desired item faster, this process will provide him with a good opportunity to teach him to work harder for more immediate gain.

You can facilitate this by allowing them to do extra tasks to earn extra spending money. However, avoid encouraging them to think that they are paid to do their share of helping around the house. Instead, make sure they understand that the work they are doing goes beyond what is regularly expected and will therefore result in additional income.

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Another option to help your impatient child reach their goal faster, and at the same time teach them about credit, is to lend them money. Before doing so, be sure to define the terms of the loan: how much the payments will be, when they must be made, and how long your child must pay off the debt. Don’t set a payment so high that he has no allowance left to spend/save each week.

For an older child, consider a little interest to teach him the cost of borrowing. Show your child their progress by tracking their payments through to loan repayment. Let them know they can pay off the debt sooner if they want, and if you charge interest, that can teach them how that will reduce the total amount they have to pay.

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Taking your kids shopping regularly can help them learn to be a savvy shopper. This gives them a good opportunity to understand how much things cost, how comparison shopping works, how to budget within a limit, and the role marketing plays on their spending choices.

Share your best tips and tricks with them while they’re still happy to come shopping with you, or have fun learning together how to save or wait for what you want to put on sale.

Above all, remember that your children are watching everything you do and learning their attitudes about money from you. Show them good financial habits, but don’t worry if you don’t have it all figured out and find yourself relying on credit to supplement your income. Contact a nonprofit credit counselor for free advice on managing your money. It’s never too late to learn.

Sandra Fry is a credit counselor in Winnipeg with the Credit Counseling Society, a not-for-profit organization that has been helping Canadians manage their debt for over 25 years.


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