Financial literacy for kids
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What is financial literacy?
Financial literacy is knowing how money works, what’s most important, and what to do when things go wrong. And just like playing the piano, or scoring the perfect slapshot, managing money well is a skill we have to learn. While Teaching your kids about money can build their confidence—after all, they’re developing a skill, making informed decisions, and learning from the results.
When to teach your kids about money
No matter how old your kids are, they’re the right age to learn about money. As early as age three, your kids notice your good financial habits. School-age kids start to understand the power of a dollar, without necessarily understanding the value of it. Start sharing what you know before they get their first job or leave for university. If you’ve already missed that date, it’s even more important to start today.
What to teach your kids about money
We probably all agree that it’s not super valuable to lecture any three-year-old about credit ratings and retirement savings. That said, every child’s different, so get a feel for your kids’ understanding and interest, then find practical and creative ways to share the value of money, the importance of budgeting, and hazards of social pressure.
The value of money
When your kids watch you tap your card at the grocery store, they’re not exactly getting the full story. No matter the age of your children, they need to know the true value of money.
Budget category | Younger kids | Older kids |
|---|---|---|
Saving | Have them wait their turn Have them wait in line Talk about what they’re saving for and why | Help them set short and long-term saving goals that are meaningful for them Encourage them to save for experiences, not just material goods Show them how to sign in to their account to watch their savings grow |
Spending | Let them decide how to spend their money (a poor choice can mean choosing more wisely next time) Let them pay the cashier Talk to them about the difference between what they need and what they want | Let them budget for some of their needs Let them prioritize their own wants Talk about debt—how it can get out of hand, and how a bad credit rating can affect their future |
Sharing | Help them share their toys Explain how donating things they’ve outgrown can help a good cause Share ideas about how to use their sharing jar money | Share causes that matter to you and encourage them to pick ones that matter to them Urge them to find creative ways to give and to inspire others to give Remind them that donating time is just as valuable as donating money |
Budgeting—the 3 jars
To start budgeting with your kids, give them three jars (or three no-fee bank accounts for older kids)—one for saving, one for spending, and one for sharing. Decide with your children how much of their money will go into each.
Social pressure
Social pressure is an important, and often overlooked, part of financial literacy for kids. It comes not only from the other children in their lives, but from the personalities they follow on shows, videos, and social media.
Help your kids see how what they want, or think they need, is affected by what other people have—or what other people tell them they need. It’s important for your kids to understand social pressure for what it is, and to reflect on what really matters to them.
How to teach your kids about money
Like a lot of things, getting your kids interested isn’t about why, when, or what you say, it’s about how you say it.
- Start slowly, make it fun, and keep it consistent.
- Be open about your mistakes and your worries, and show them that it’s okay to talk about it.
- Put it in their terms and in the context of their life, not yours.
- Set and save for some goals as a family, working together to make them happen.
- Team up to find answers to questions you can’t answer, changing your own habits to show the value of what you learn.
Yearly check-in during financial literacy month
Each November is Financial Literacy Month in Canada. Take it as your cue to start the conversation with your youngest children or continue it with ones who are already learning. Take a little time for yourself too, to brush up on your own financial skills and best next steps.
And remember: You’re the example your kids will look to. It doesn’t mean you have to be perfect. But it does mean you have to be willing to listen, willing to learn, and open about what you know.
1 https://www.canada.ca/en/financial-consumer-agency/programs/research/summary-covid-19-surveys.html
The commentary in this publication is for general information only and should not be considered legal, financial, or tax advice to any party. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation.