With the return to classes, brown-bagged lunches and regular learning routines back in full force, there’s no better time for parents to focus on their children’s financial know-how.
“Money management isn’t a subject that most schools focus on, and so it’s really up to parents to teach these foundational skills,” says Jennifer Flentge, an investment expert with First West Credit Union’s Envision Financial division “Be honest and open about money with your children in an age appropriate manner. Look at everyday situations as opportunities to learn. For example, let them know how much is budgeted for entertainment and suggest alternatives like borrowing a movie from the library instead of going to the movie theatre if that budget is already met.”
Research suggests that children’s financial habits are formed as early as age seven, signalling a need for conversations about money to begin as soon as a child is old enough to understand the basic concepts. From age three to five, these lessons can include the difference between saving and spending, what a need is versus a want and the idea that sometimes you need to wait before you can have something—a lesson easily demonstrated with saving, spending and sharing jars.
“Setting up three money jars is a very visual and tangible way to see where their money goes. The spending jar would be for them to spend as they wish, a saving jar to save and the third for charitable giving. Alternatively, with today’s tech-savvy children, allowing them to do this online is effective and provides a great opportunity to learn about earning interest on their savings.”
Between age six and 10, financial skill-building should grow to include candid explanations of your decision-making process in everyday situations (choosing between brand name and generic products in the grocery store, for example—or calculating your family’s savings when buying in bulk.)
It’s also an essential time to give kids a bit of money to learn with, while tweens and young teenagers can begin to understand compound interest and the difference between good and bad debt.
Flentge also recommends that parents avoid linking weekly allowance to household chores. “Chores are a part of life and living with people in a home,” she says. “Teach your children that the basics such as cleaning their rooms, making their beds, and setting the table are expected and they can earn extra money by washing the car, taking the bottles to the recycling depot or setting up a lemonade stand.
“The best financial help any parent can give their child is information and experience—and your financial advisor can help you identify everyday teachable money moments if you’re unsure of where to start.”
About Envision Financial
Envision Financial is a premier provider of banking, investment and insurance services for residents and businesses throughout the Fraser Valley (including Hope,) Lower Mainland and Kitimat regions. As a division of First West Credit Union, B.C.’s third-largest credit union with 53 branches and 40 insurance offices throughout the province, Envision Financial brings innovative products, an extensive branch network and local decision making to the banking experience. For more information on Envision Financial, visit www.envisionfinancial.ca.