Money Lessons to Teach Your Kids at Every Age

Money can be a tricky topic to discuss with your kids — especially if you’re dealing with your own financial struggles. However, experts say it’s a conversation worth having openly and often to ensure your children learn the language of money from an early age.

Recent research from Edward Jones shows that many Canadians don’t feel they had an adequate financial education before they went off into the real world. In fact, less than half (46%) of all Canadians surveyed said they were equipped with enough financial literacy to navigate money issues successfully after graduating high school, according to the report.

Young Canadians aged 18 to 34, in particular, are among the least likely (40%) to agree they had adequate financial knowledge at graduation, according to the same report.

The good news: It’s never too early (or too late) to start the conversation at home, says Kirsten Nelms, principal, associate portfolio manager with Leith Wheeler Investment Counsel in Vancouver, British Columbia.

To give your kids the best head start possible with money, here are some foundational lessons to teach them as they grow.

Ages 3 to 5: Money is a tool

When kids are in preschool, introduce the idea of money as a tool to buy things. Use play money or coins to teach counting, addition and subtraction while making it fun.

When it comes to teaching her two young children about money, Nelms says she keeps it simple with mason jars labeled with three categories: spend, save and gift.

“Each week when they get their allowance, they can decide how much money should go into each one of their buckets so they can figure out how they want to use their money,” Nelms says.

If your kids express interest in money and ask questions, don’t shy away from the topic. Instead, seize the opportunity and talk about it at their level when they raise their hands, recommends Russ Dyck, a father of two and an independent certified financial planner with Finovo Financial Planning, based in Calgary, Alberta.

Ages 6 to 12: Wants aren’t the same as needs

For primary-schoolers, explain the difference between needs (shelter, food, health care, for instance) versus wants (the latest iPhone, video game or trendy clothing).

Consider starting with a relatable task, like weekly grocery shopping — pointing out items on your list and talking about prices and which products are needs versus wants, Nelms suggests.

A weekly allowance is another great tool to drive the point home. When kids get older and have an allowance, they might start getting interested in “want” items. These might be brand names or more expensive electronics that take longer to save up for. Consider lending them some of the money for a big item they want and ensure they pay you back (with a small amount of interest), Nelms says.

This helps your kids understand that borrowing money from a bank or using plastic isn’t free, Nelms points out. They’ll learn the lesson by owing you rather than a credit card or lender, she adds.

Ages 13-15: Money management requires the right accounts

Once you have teenagers, it’s time for them to learn how to actively manage their own money.

Opening a student chequing account for teens, with you as a co-owner, is a good first step so they understand how to balance a budget and monitor money coming in and going out, says Ernan Haruvy, a behavioural economist and professor of marketing with McGill University in Montreal, Quebec.

From there, you’ll want to teach your teen about concepts that are relatable, such as helping to pay for auto insurance when they start driving, understanding what goes into their credit rating, how credit cards work and how to balance their paycheques from an entry-level job, Haruvy says.

Nelms agrees.

“Make it a positive experience, low risk and low stakes, and try and emulate real-life situations as much as you can, and as many times as you can, so that when they face something, it’s muscle memory; they already know what to do,” Nelms says.

Ages 16 to 18: It pays to plan for future education costs

If you’re saving for your child’s post-secondary tuition, pull up the registered education savings plan and show them how the savings have grown over time and what stocks those funds are invested in, Nelms recommends. If you have another savings vehicle earmarked for education, do this with that product, too.

“They can take that into account for how much they’re going to be spending, and how much they might need to be saving on the side in their spend/save/gift categories (to help pay for school),” Nelms says.

Have open conversations about money often

Dyck advises that parents be as open and honest as possible while sharing age-appropriate, engaging dialogue around financial topics. This also helps take the emotion out of tougher money conversations later on, Dyck adds.

“Anytime money comes up in conversation, it’s like emotions rise, the stress levels rise, and it’s not a good experience,” Dyck says. He notes that some of his clients hold weekly family money meetings so children see (and hear) their parents discussing their finances with respect and transparency.

The meeting can be brief (15 minutes, tops) and cover current account balances, spending over the previous week, unexpected and expected expenses and checking the status of your grocery budget, Dyck suggests.

“It’s just very high-level touches, and try to make it a common weekly thing that isn’t stressful,” he recommends.

Allow them to make mistakes

Sometimes, it takes making a money mistake, like bouncing a cheque or missing a credit card payment, for older kids to learn what not to do. More to the point, you shouldn’t swoop in to save them or try to manage things for them, Haruvy says.

The key is to minimize the amount of risk that those mistakes pose, he adds.

“Those mistakes are not disastrous,” Haruvy says. “So a low-limit credit card or a teenage or young adult bank account that has some safeguards, gives them some financial independence that allows them to fall on their face and get back up. That is very powerful learning. That is negative reinforcement, and it’s much stronger than positive reinforcement.”