Teaching kids savvy money skills especially crucial these days

Start the process as soon as your kids ask you to buy them things

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In the current climate of rising costs, it is crucial to become financially adept to balance our budgets and not rely on borrowing to cover any deficits. But it’s not only a good idea that we learn how to manage our money better, it’s just as important to teach our children.

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You can start this process as soon as your kids start asking you to buy them things. That means they’re willing to learn about money, but before they can spend it, they need a way to earn it. Child support is often the first way to get money. Decide whether you want to link it to age-appropriate tasks or offer it purely as a learning tool. I found that tying my kids’ allowance to chores required a lot of follow-up before I could pay for them.

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Depending on what you can afford and what you want your child to do with their pocket money, a good rule of thumb is 50 cents to $1 a week per year of life. That means your 4 year old would be paid $4/week and your 10 year old would be paid $10/week.

Then choose how you want to manage the allowance.

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It will be more of a visual lesson to start with giving them cash to put in their piggy banks. As they get older and understand the concept of electronic banking, you may want to switch to weekly automatic transfers to their own account or an account shared with you.

Next, encourage your child to come up with a goal for something they want to buy. This is a good way to teach them about savings and delayed gratification, which is worth mastering before they’re old enough to access credit.

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

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As children grow older and more willing to spend, teach them the time value of money. This is based on how long someone has to work to earn the money to buy an item.

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We used this tactic with our own kids when they wanted a new item that wasn’t essential. It helped them understand the value of our time and that there are limitations to what we can afford. If your child thinks they should be able to buy an item they want faster, this process is a good opportunity to teach them how to work extra to make a quicker payment.

You can make this easier by allowing them to do extra chores to earn extra pocket money. However, do not encourage them to believe that they are being 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 normally expected and therefore will result in extra money.

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Another way to help your impatient child reach their goal faster while also teaching them about loans is to lend them the money. Be sure to set the terms of the loan beforehand: how high the installments will be, when they are due, and how long your child will have to repay the debt. Don’t set the payment so high that you don’t have something left over to spend/save every week.

For an older child, consider a little interest to educate them about the cost of borrowing. Show your child their progress by tracking their payments until the loan is repaid. Let them know they can pay off the debt sooner if they wish, and charging interest can teach them how it will reduce the total amount they have to pay back.

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Taking your kids shopping regularly can help them learn to be a savvy shopper. It gives them a good opportunity to understand how much things cost, how price comparisons work, how to budget within a limit, and the role marketing plays in their spending decisions.

Share your best tips and tricks with them while they’re still happy to come shopping with you, or learn together how best to save or wait for what you want to sell.

Most importantly, remember that your children are watching everything you do and learning their attitude toward money from you. Model good financial habits in them, but don’t worry if you don’t figure it all out and rely on credit to supplement your income. Contact a nonprofit credit counselor for free money management advice. It’s never too late to learn.

Sandra Fry is a Winnipeg-based credit counselor with the Credit Counseling Society, a nonprofit organization that has been helping Canadians with debt management for more than 25 years.


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