Teaching your kids how to have a healthy understanding of money and how to manage their budget is crucial for their future success. In many ways, parents who speak to their children about money on a regular basis raise kids who are more financially aware than those parents who do not.
The reality is that we live in a capitalist society and having an understanding of basic personal finances is important to navigate the waters of spending, saving and borrowing.
One of the most common ways that parents can help their children develop an understanding of basic finances is by paying them an allowance.
Additionally, keeping the conversation open when it comes to money is an important part of the learning process. As children age and mature, there are different ways to advance the discussion around saving and spending habits, including playing store when they are younger, having them help develop a weekly grocery budget and even getting them involved in saving for their college or university education.
Age appropriate spending and saving
By the time children are in middle school, they should have a basic understanding of spending, but their savings habits will need to be developed. By high school, children should be learning about interest and how they can invest for their future costs, such as college or university.
Planning for university or college
As CST Consultants Inc., one of the leading Registered Education Savings Plan (RESP) providers in Canada, notes, it’s important for parents to prioritize discussing with their kids the future cost of a university education and how to save for it in an effective way. This is also where investment tools, like RESPs, can come into play, which allow children and families to save for future education costs in an effective and organized way.
Tips to get kids to proactively save
Teaching children how to save can start in elementary school. If there are extra activities that your child wants to participate in, encourage them to discuss a savings strategy with you as the parent. Perhaps you can give them 60 percent towards the cost of that activity and ask them to come up with the rest. Have them consider ways they could raise the additional cost, either from their allowance or birthday or holiday gifts, or through a part-time job. Regardless of the plan they come up with, it will help build their understanding of the financial world and how they can play an active part in their financial future.