Start good habit early: managing money for kids

This is part four of our 5-part series for Financial Literacy Month

There are so many things to teach your kids when they are young—and one of the skills that is going to have the most profound impact on the rest of their lives is learning how to manage their money. Passing on financial knowledge to your kids is important in helping them avoid making some costly mistakes down the road.

Here are a few tips on how to help your kids start developing good financial habits early on in life:

Involve your kids in the process

Help them set up a bank account early to learn about banking and saving. Some credit unions and banks will offer cash incentives from time to time to encourage kids to open an account. They may require the money to be left in the account for a certain time period of time in order to receive the bonus.

Teach your children to pay themselves first

As they receive money from allowance, babysitting, paper route, or flipping burgers at a fast food spot, teach them the value of setting aside 10% of whatever they earn for savings. Suggest that they put that money in a high interest savings account or guaranteed investment certificate (GIC) where they can watch their money grow and compound over the years.

Make learning about money fun

Playing board games as a family is not only an excellent opportunity for family time, but it can be educational. Classic games like Monopoly, Payday and The Game of Life provide great ways to learn about how money, investing, and managing resources works.

Teach them about royalty

Advertising loves to tell us that credit provides freedom, but ask anyone owing thousands of dollars on their credit card and they will more than likely tell you otherwise. Teach your kids the basics of prioritizing expenses and paying with cash—instead of credit—when you have the cash. This is also a great way to teach them about compounding interest, including how we benefit from it when we save and how it can lead us into a downward debt cycle when we owe.

Provide a matched savings experience

Offer to match your child’s savings dollar for dollar as an added incentive for them to save money rather than spend it. After all, where else can they get an instant 100% return on your money?

Encourage financial goal setting

Often, our financial or consumer goals take a detour when we get sidetracked by impulse purchases. Assist your kids with setting and attaining their own goals such as education, a bike, or a trip. Help them work out time frames and financial saving schedule to get there. Most importantly, set up an automatic savings plan to keep them on track to reaching those goals.

Family Services of Greater Vancouver can help you with your financial well-being, including making more informed consumer choices. We have workshops and one-on-one financial coaching to figure out your financial goals and how to achieve them. Email moneyskills@fsgv.ca or call 604-638-3991 to get in touch with our team and learn more about how we can help you with your financial goals.

Murray Baker is a Financial Facilitator and Coach, Financial Empowerment, with Family Services of Greater Vancouver. He is also a speaker and author of the bestseller The Debt-free Graduate: How to Survive College Without Going Broke, now in its 14th edition.