Starting kids early with anything is a great approach, even if it means exposing them to ideas that they won’t have to stress about until they are adults. Talking about death, politics and how it facts everyday life, and even the environment are a definite yes. Money is no exception, and dealing with money, appreciating value and having deferred gratification is essential. It helps them build balanced budgets as they grow (not in excel but informally knowing not to spend beyond your means), minimize debt and think of the future.
It is hard to dive into the nitty gritty of all the complications that comes with dealing with finances, but easing them into it through day to day practice and discussions will help make it much easier and intuitive for them. Here are some examples of how to do that – obviously each kid’s absorption level is different but you can more or less express the same ideas in more creative ways if you don’t see them working.
- Open an account for them – as early as you can, the satisfaction of seeing their savings grow will be immensely useful for them. Even if it is for $100, often this will encourage them to save their holiday and birthday money gifts from family and friends and think twice before buying frivolous toys. Check and compare banks to see which one offers the best options for new kid accounts.
- Avoid allowances – doing chores for no money should be the norm, which is really what they should be doing. The crazy sense of entitlement that kids have these days is because we consider everything they do as a favour, and everything we do as a given not to be appreciated. They are part of a family unit and there needs to be a sense of working together for the family good – irrespective of financial rewards. If there are things that are slightly outside of the box, i.e. babysitting, or asking them to shovel the neighbour’s driveway that can be an exception. But their income should be limited to part time job, garage sales, or monetary gifts.
- Have a monthly budget –Despite having money they should be given limits, this will avoid future disappointments and the urgency to bail them out. So if they have $100 in their account, and you don’t expect gifts to come in for another 5 months, give them a $20 monthly budget before they run out of money. Some might say have them spend all their money and let them learn the hard way – that is fine assuming you are not pressured to give in and bail them out when that happens.
- Have them go through your monthly budget with you, even if you take 15 minutes to just read it out for them every month, they can ask questions and that way they can appreciate the money you spend on all the other things they take for granted. You can ask them how the bills can be reduced (i.e. turn off the lights more) and get them to contribute with ideas.
- Discuss sales and offers – this includes the fact that just because there is a deal on something doesn’t mean you have to buy it. If a toy is $10 instead of $15, you’re not saving $5. You’re spending $10 you wouldn’t have otherwise spent. Also get them in the habit of looking for coupons or waiting for deals on things they were going to buy anyway but expect them to be on sale later on (deferred gratification). This is particularly good on post-Christmas sales or out of season clothing.
Obviously there are a few other ideas such as talking to them about taxes, university costs and trips. But I find these are general and universal enough to apply to most kids and most family income levels, whether you’re a tycoon or barely surviving, having kids “get” finances goes beyond you and long after you pass away.