Financial Smarts for Kids
on November 05, 2007
ost parents understand that teaching basic money skills means putting a certain amount of money in the kids’ hands and letting them choose what they do with it. The idea is that kids will learn how to manage money simply by having some money of their own.
But if you’ve followed the typical advice for a weekly allowance of one dollar for every year of age, that’s a cool $10 in the hands of your gummi-mad 10-year-old. What changes in the tween years is that you’re no longer looking over their shoulders every time they spend it. That can be hard on parents when they see their child ‘wasting money’ on junk food or the latest plastic action figure. It’s even more frustrating if your child runs out of cash mid-week and whines for more from the bank of Mom and Dad. So how do you get kids to be good pint-sized money managers before they hit their teens?
Kids are used to getting what they want
“If kids get a regular allowance, say, every two weeks, then they know they can’t buy a certain item until they’ve saved enough money,” says Geoff Kirbyson, a finance columnist for The Winnipeg Free Press. “It teaches them discipline and patience at the same time and it can also motivate them to try to make more money by doing additional chores around the house. The
patience part is the most difficult one because so many kids, from a certain age, are used to getting what they want when they want it.”
Leave room for candy
Parents can offer guidance by helping kids set a savings goal for something they really want, like a skateboard, and then reminding them of that goal when they want to buy something frivolous. You could make the savings compulsory, but that defeats the whole purpose of making sound monetary decisions on their own. It’s better to ask kids to keep a record of their spending so they can see where the money went. Then they can figure out how they could save while still allowing themselves occasional treats.
A bank account with Internet access is a cool start
Kirbyson tries to instill the value of money in his two kids, nineyear-
old Mia and six-year-old Alex. The children have chores to do in exchange for money so they understand that cash doesn’t just grow in Dad’s wallet. He says the challenge is getting across to them that buying something they don’t need or won’t use goes against the saving philosophy.
“If they really want something, we tell them they have to find X dollars in grocery coupons that we’ll match. This sends them scurrying off to check the flyers and then trying to convince us we really, really need to buy eight-litre tubs of ice cream, sixpacks of nail polish remover and the party-pack of guacamole so they can use the dollar’s worth of coupons on them.”
Kirbyson suggests that the best thing you can do for kids aged nine to 12 years is to take them down to their bank or credit union and open up an account with them, including their own bank card and Internet access (but no overdraft). Then they can monitor the money in their account in a way that we couldn’t as kids without going down to get our passbooks updated at the bank. With kids’ natural inclination for technology, they might even develop more banking savvy than their parents.
Money Smarts for Kids
- Give one dollar for every year of age in allowance.
- Motivate them to earn more by working around the house.
- Help kids set a savings goal but let them decide how much to save.
- Ask kids to keep a record of their spending.
- Open a bank account with kids over nine years of age with Internet access and a bank card. PC