As a parent, it is easy to feel like you are constantly giving your kids advice about school, friends, family, and more. But what about money?
Financial literacy is a tricky topic, but it is also something your kids need to know. Over 40% of Canadians are financially vulnerable.
If you do not address the importance of understanding healthy financials from a young age, your children may not learn about budgeting and saving money until they are older; and by then, it might be too late.
On the other hand, kids who talk to their parents about finances score up to 33 points higher in financial literacy. So how can you start talking about money with your kids? Here are some tips for talking with them at different ages.
Tips for Speaking to Children About Finances
Here are some suggestions for financial education for kids:
- Start small. Do not overwhelm kids with information right away! Start by talking about the basics: what makes money, who uses it, and where it comes from.
- Make it fun. Rather than sitting down and lecturing your child about the importance of saving for retirement and other long-term goals, try using games or activities to teach them about these concepts. For example, try making a treasure hunt where they have to find different items based on a budget.
- Create a family budget. Talk about how much money you earn and spend each month.
Make sure your child understands what an “expense” is by explaining why we have expenses like mortgage payments, electricity bills, water, car loans, groceries, insurance, etc. Explain these are all necessary expenses because we would not be able to live comfortably without them.
Start With the Basics: Ages 3 – 5
You can explain how we all have and use money for things we need or want. You can also show them how much things cost by using play money in everyday situations, like shopping at the store or going out for ice cream.
When they get older and understand more clearly, you can start talking about saving money by putting aside part of their allowance each week or month so they do not spend everything immediately. This practice helps develop good habits around saving early on rather than waiting until adulthood.
Introduce Simple Concepts: Ages 6 – 8
The best way to start a conversation about money is by talking about what they want to do with their money. Teach your kids how to trade cash for things they want. If they are going to buy a new toy, ask them if they have enough money in their piggy bank for it.
You can also have them think about things like what would happen if they did not buy a toy today? If not, what could they buy instead? How much would that cost? Those questions can help them understand how their choices affect their ability to get what they want later on down the line.
Teach Good Money Habits: Ages 9 – 11
At this age, kids can understand more about what it means to say, “Money doesn’t grow on trees.” You can begin introducing basic financial concepts like “borrowing” and “saving” at this age. Try having your child save money from birthdays or other gifts to buy something special. They can learn valuable lessons about patience and delayed gratification.
Make sure you explain an allowance (the money they get for doing chores around the house or helping out with other household tasks) and why they must save some of it. Encourage them to buy things like school supplies or toys when they need them instead of waiting until Christmas time when Santa brings presents.
Saving money is part of being financially responsible, but you also need to know how to spend your money effectively by choosing quality goods over cheaper ones. Your kids can make informed decisions about whether or not buying an item is worth its expense by considering the resale value and long-term usefulness of the product. For example, if you buy a cheap pair of shoes that fall apart quickly, you will not get much use out of them.
Develop Money Management Skills: Ages 12 – 14
- Kids in this age group are at an ideal time to start learning about money management. They are old enough to understand what it means to manage money responsibly, but they are still young enough so they are not yet ready for a job or other adult responsibilities. They may have some savings from birthdays, holidays, or other gifts, allowing them to learn about budgeting and savings plans.
- Establish short-term goals within reach and help them achieve them. For example: “I want to save $100 by the end of next week so I can buy a new pair of shoes.”
Set aside time to discuss long-term goals and how they will get there. Examples could be saving for college or buying a house (or both). - Talk about money as it relates to their lives right now. For instance, they can discuss how much allowance they get each week or how much extra cash they need for an upcoming trip or event, going out with friends, etc. They can also uncover why certain expenses are necessary.
This age group has many opportunities for learning financial concepts, whether they are learning about compounding interest or how credit scores work. The key is making sure they understand the importance of saving and investing early.
Plan for the Future: Ages 15 – 18
As your child ages and begins thinking about their career path, it is also helpful to learn about saving money for retirement and other long-term goals. Teens should know about credit cards, mortgages, student loans, and other forms of debt before entering college, so they do not get into trouble. Help them understand the benefits of having a good credit score and the importance of paying bills on time.
Teach them different types of debt (like credit card debt that 29% of Canadians have) to avoid at all costs because they usually have high-interest rates and can be difficult to pay off. Also, show them how they can set aside some money each month for an emergency fund so they will not fall into debt if something unexpected happens (like losing their job).
Then, move on to insurance: health, life, home, and auto. Explain how insurance for parents protects everyone when bad things happen, like getting sick or having an accident at home or at work. Ensure your children understand how life insurance planning works, so they do not overspend on premiums.
Final Thoughts
Financial literacy is a valuable skill. It helps you make better decisions, save money, and achieve your goals. One of the best things you can do for your kids is help them develop good financial habits. This habit can help them avoid debt and build a stable future.
Life insurance can be a vital asset to help you protect yourself and your loved ones against financial hardship when unexpected events happen. For help reaching your financial goals, contact Hometown Life Insurance today at 289-606-0103.
