The Basics of Smart Saving, Spending and Sharing: Teaching Kids about Money

This morning, my wise and worldly 7-year-old asked me what I was going to be writing about while she was at school.

When I told her it was an article about teaching kids the value of money, she gave me a look reserved for times I’ve said something so obviously ridiculous that she needs to set me straight.

“Mom, I already know all about money: you need to save some, use some and give some away. Maybe you need to pick a different story to write.”

Well okay then.

It seems like it was only yesterday that my children were young enough to want to put all their money into their mouths, down the heating vents or into every gumball machine that crossed their paths. I wrote about my approach to talking about money during those early days – and how following the advice of parenting expert Barbara Coloroso was my guide to getting that conversation started.

As my daughter highlighted, that approach has been fairly successful. We’ve managed to set a healthy foundation for our kids to save, spend and give away portions of each dollar that comes into their hands, often without much or any prompting.

But with one child now earning her own money, and a bank account of her own to save it in, I’m realizing that the challenge ahead is teaching them more practical applications for saving and spending their money.

With November being Financial Literacy Month, now is an excellent time for all of us to think about our strategies for managing family budgets, reaching savings goals like funding a post-secondary education, and talking to kids about the value of money.

Saving: setting goals and strategies for the whole family

In our house, we find it easier to pay ourselves first. For my younger kids, I try to give them allowance in coins so they can easily split up their money between their piggy banks or bank accounts and their wallets – usually about half of what they are given.

The same principle applies for birthday money, other cash gifts, and my oldest child’s babysitting earnings: the kids are now in the habit of putting some of their money aside for savings before even thinking about spending. They can then access these savings for special items or events, like souvenir money for holiday trips, games or apps they want to help pay for – even major purchases like the iPad I bought together with my son last year.

My oldest daughter, now in Grade 7, opened her own bank account on her 10th birthday, and is slowly saving up a nice little nest egg. What she wants to use it for changes weekly, but the fact that she is practicing working towards some long-term goals and dreams like a plane ticket, a car or opening her own bookstore one day, is fun to watch as her parent.

For myself, I also make sure that a part of my income goes straight into savings. I am disciplined about saving a part of every paycheque in a separate bank account for things like vacations, income tax and emergency car or home repairs. Even just tucking away 10% of every cheque makes a huge difference in savings by the end of each year.

And my contributions to my children’s Registered Education Savings Plans (RESPs) happen automatically on the first of every month via pre-authorized debit; a simple and effective strategy that has helped me ensure the funds for my kids’ future education will be there when they need it. Options like an RESP continue to be one of the best ways for education savings: you can generally open an account with as little as $10 a month, and enjoy watching your savings grow tax-free over time PLUS the government grants.

As Education Savings Week approaches (November 18–24), along with the 20th anniversary of the Canada Education Savings Grant (CESG), we can all benefit from reviewing our savings strategies for things like our kids’ future education and taking advantage of great ways to save like an RESP.

Spending: working towards ‘to each their own’

One thing I really took to heart from Coloroso’s parenting books was helping my children feel independent about how they spend their own money. The idea being that we can guide our children on the value of money, but then we need to give them plenty of room to practice stretching those financial muscles.

It’s easy enough on paper, but quite hard to do in real parenting life. I cringe inwardly when my children want to spend their pocket change on dollar store trinkets or any more stuffed animals for their already massive collections. I will never truly see the value of teeny tiny figurines shaped like kitchen appliances or understand why they want to make, or store, any more putty.

But, when my oldest gets to leave the school grounds on Fridays to buy lunch with her friends, we often split the cost at an amount we’re both comfortable with. And it’s rewarding to see my children go into places like a bookstore and work out what they can afford, and how much they want to part with, from their own money in their wallets. My children are often also part of the conversation about what I can afford for eating out or special activities, once we take into account household bills and expenses.

In essence, I’m trying to give them some insight on the ways we need to spend money in adult life – and also some practice weighing spending choices on their own when the stakes and the costs are still low. Ultimately, I’m hoping they’ll have some financial decision-making experience under their belts for when they start earning real paycheques and paying real bills down the road.

Giving away: acts of kindness and charitable giving

This aspect of money management is particularly important in our family – sharing what we can with people who need it more or giving to causes close to our hearts.

Sometimes this is as simple as offering our pocket change to people asking for help on the street, or making small donations at check-out lines to various local charities. Other times my kids ask for food bank donations or cash donations to good causes at their birthday parties instead of gifts, an approach that is becoming more and more common amongst my kids’ friends.

We also talk about how volunteering our time for community and school initiatives is an equally valuable way to give back, especially when our budgets are tight.

At the end of the day, my motivation is to keep us all humble and willing to help others if and when we can. And it helps to balance out their desire to save and spend their own money with a sense of generosity and community spirit to make the world a nicer, kinder place to live in.

Like with so many things in the parenting journey, it’s just another example of how we learn or relearn life lessons right alongside our kids. In trying to figure out how to teach my children about the value of money, I’ve certainly taken a closer look at how best to fine-tune my own spending and saving habits over the different stages of our family life.

As my children approach the teen years and their own financial independence, I’m comforted by the idea that kids and grownups of any age can always benefit from a refresher on the fundamentals of money management. It’s a constant and rewarding work in progress – for all of us.

Carmen Kinniburgh

Carmen Kinniburgh is a freelance writer and editor exploring topics and ideas about parenting and families, Canadian science and research, health and medicine, as well as travel and lifestyle. Born and raised in Alberta, Carmen has also lived in Southern Ontario and Manitoba, where she worked in professional communications for a university and a national health charity. Currently living in Thunder Bay, Ontario, she gets all her best ideas and insights for Parentwise from her own three delightfully precocious children.

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