Lessons in Loonies: Financial tips for the whole family
Whether you’re teaching your little ones to tie their shoes, pack their lunch or ride a bike, parenting is a non-stop journey of passing on lessons.
Teaching them about money is no different.
A poll from Edward Jones found that less than half of Canadians felt they had enough knowledge to navigate their finances successfully when they graduated high school.
That’s why we chatted with Scott Plaskett, certified financial planner and CEO at Ironshield Financial Planning. He has 30 years of experience working with families and brings a unique perspective as a father himself.
How to talk to kids about money
When it comes to learning about money and good financial habits, kids’ powers of observation are, well, powerful. As soon as your child recognizes that items cost money, it’s time for parents to start having open discussions about dollars and cents.
“The idea that [parents] are going to go talk finance, now you go play among yourselves really is not encouraged in the world of financial planning,” he says.
A good time to kick off the conversation is when your child has a “want.” This might be a new toy, nail polish, or concert tickets. Then, explain that earning money can enable them to buy what’s on their wish list.
“Make sure they know how much money it costs and that they see the transaction take place,” Scott says. It doesn’t matter if the parent still pays — opening your child’s eyes to how much things cost helps ease them into financial literacy.
Here are some tips for building financial literacy – and confidence – successfully.
Provide an allowance
As part of holding conversations about money, Scott recommends giving your child an allotted amount of money for completing their chores (or just for the sake of being a good kid).
If you think about it, an allowance is essentially a budget that gives them the freedom to make financial decisions while knowing their monthly limit. Money Coaches Canada recommends giving kids one dollar for each year of age every week. For example, if your child is seven years old, they should get $7 per week.
In terms of guiding your child through how to use their allowance, consider narrowing it down into categories and be clear on the rules. For example, a rule could be that allowance money is specifically for buying the toys they want.
Allowing your children to make financial decisions independently can be quite empowering for them. Allowances encourage them to spend their money wisely, directing their monthly funds to items that are meaningful to them. Whether or not you agree with them spending it all on a video game, the point is that your child starts to make spending decisions on their own.
Hold a lemonade stand
Don’t underestimate the power of a lemonade stand. It could be your child’s first foray into entrepreneurship.
“A lemonade stand represents the basics of commerce,” Scott says. In fact, this is a parenting technique he used on his own children.
“One thing we did was that we showed them what the costs were to make lemonade and muffins. And we showed them that all the money that we made didn’t necessarily go back to them because they had to repay some of the costs for the ingredients,” he explains. “They became aware that if they do something that's of value to somebody else, then there may be an exchange of dollars for that value added.”
Let your kids make mistakes
Naturally, kids will make mistakes or say they wish they spent their allowance differently. But as Scott points out, “it's quite often the bad decisions that instill good habits.”
After all, the world of finances often involves trial and error, and we're playing through it together. So, if your child is blowing their allowance on candy, remember that hiccups (and tummy aches!) are simply stepping stones to financial literacy and freedom.
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Jan 4 2024