Money Smarts

It’s never too early to talk to your children about spending, saving, earning, borrowing, and sharing money. You can help your children form healthy fiscal habits and place them on the right track to financial stability for life.

Julie Tessier, a Financial Consultant associated with the Investors Group who works on the West Island and in the Greater Montreal area says “there are five key steps to take when showing children how to be smart about money.”

Show first by example

No need to point the behavior out.

“We know kids learn most from watching and modeling their parents behaviour” Julie says, “so it’s important that parents are seen doing what they tell their children.” What you do is what they see.

Talk about money

Don’t make it something scary, shameful, or secret.

The daily reality of money management should be visible and discussed with no strong emotional baggage. Make it normal and let them see that it is in control so they also feel safe. There is no need to share the 'to the penny' detail. When I asked Julie about bills, expenses, savings accounts, and investments,” she responded, “they can and should be discussed openly over supper. If you paid bills, mention it. If your savings statements came in, talk about them. You might say something like, "I paid the bills and put the vacation allowance in the savings account. I’m really pleased with its growth", or "our statements came in for the renovations account and it’s not where I’d like it to be. We might need to put away a little more each month." Don’t make it dramatic - be very matter of fact. If the conversation moves onto another subject, that’s fine. Make choices visible. As you make a decision between spending and not spending, make your thought process open. “We could get you the three back-to-school shirts, but you only really need two and I would rather put the rest of the money towards the vacation account.”

Make it theirs

If you have a vacation account, make sure the kids know it is for their vacation too. If you are saving towards renovations, let them know it is about their house too. Show your children that handling money takes some thought. Every child should have an allowance that is in keeping with their age and real expenses, and they should have a savings account. You might start a 4-year-old with $2 in quarters, where they put $1 in a piggy bank and can keep $1 in a wallet to spend as they wish. Keep this model in place as the child gets older, opening up investment accounts as the dollar amounts get larger.

Stick to your guns

Disappointment and sadness are to be expected when children have to delay gratification. Let them know that there will be other opportunities for the same or similar things to do or buy. Let them experience the consequences of their choices. If a child really messes up and spends all their money on immediate gratification, be extra careful to avoid criticizing their choices. Focus on their goals and what they can do in the future. Don’t forget to model the behaviour. Julie reminds us how easy is it is to send mixed messages, “make sure you don’t show them that credit can fix the problem.”

Plan for the exceptions

Decide ahead of time, how gifts and other incoming sources of money will be handled and stick to it. Bring frequent gift givers on board ahead of time. Ask that any larger amounts of money being given be attached to a large goal (high school trip, new computer, graduation, etc.) Small amounts can be treated like the allowance is. Children are not born with “money smarts.” They learn by what they see, hear, and experience, and parents have a very strong influence on all of these. The kind of financial responsibility children find in their own home will exert a powerful influence on their adult attitudes toward the use of money.