How to teach my kids about money?

By Jennifer Poon, February 15, 2023

As we eagerly await the Family Day long weekend and looking forward to some cherished time with our family, I bet you can’t help but notice the price of gas or groceries, topics like interest rates, inflation and house prices are coming up in everyday headlines and conversations. How much does our children absorb and how much can they comprehend? We may think we need to shield our kids from uncertainty, but can this be a teaching moment?

In working with families, next generation financial literacy is a popular topic with parents and grandparents. I learned from experience that there really is no one right way to handle your finances, while there are various financial planning and budgeting techniques you can adopt, our philosophy about money is individual and often passed down from our parents.

Articular how you feel about money.

Is money the roots of all evil or means to do good for the world? The first step to sharing your philosophy on money is to form one. Can you articulate your values? Are you a steward or a beneficiary of your family wealth? Many of the successful families I work with would like their family wealth to carry on through generations and would like to use their money to create positive societal impact. Successful clients work hard to create their wealth and are grateful for their wealth. What do you think about every time you spend your hard-earned dollars?

“If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime.”

Many parents feel it is important to teach their children the value of work. Paying your children for doing household chores, errands or lemonade stands are simple ways of learning the concept of paid work. We learn that we are not only compensated for our efforts, but the quality of work can determine just how much that compensation should be. Consider a performance bonus aspect to this age-old concept but also don’t be afraid to deduct pay for bad performance. Christmas and birthdays gifts can be co-op-ed, you can subsidize by matching their contribution.

Spending

I love a good sale. Do you shop around and bargain for the best deal? Bring your children along the next time you go shopping; demonstrate how you evaluate a purchase decision. What is value to you? Distinguish between a need and a want, a necessity and a luxury item. Teach them the trade-off between spending on competing purchases. If I spend the money on fancy dinners every weekend, I won’t have money for a beach vacation. If I choose to bring lunch all week, I can save up enough money to go to my favourite restaurant this weekend. Teaching them how you make small decisions can form a framework for big purchases.

Lead by example and communicate.

While your child may not yet understand the complexity of advance macro economics, don’t shy away from sharing how you make some of your financial decisions with them. Teach them about supply and demand, mortgages, leasing, credit cards and how you handle your finances. Teach them the best practice but also allow them to learn from your mistakes. Show them how to research and resolve issues. Communicate your role in your family wealth and how you wish them to participate. Communicate is key. There are no promises that you will have an agreement, but it all start with a conversation.

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