Top 10 Tips For Teaching Your Children Good Financial Management Practices

2013-11-12   minute read

1. Start planning for the future from birth. Preparing your children to have a good financial future starts as soon as they're born. Decide what sort of future financial support you want to provide for your children and research financial options like RESPs, trusts and savings bonds as early as possible. 2. Be a positive financial role model. People who are in debt today are often raised in households that encountered similar problems. Having a good grasp on your own financial situation will help your children pick up good practices and apply them to their own finances. 3. Begin talking about finances early. It's important to start teaching your children about the limitations of money at an early age. While it can be difficult to tell a child 'no', the earlier they can understand there is a limit to how much they can have, the easier it will be to curb impulsive or guilt-based spending as a parent. 4. Scale your discussion to be age appropriate. An eight-year-old child isn't going to understand something like a mortgage payment or interest rates. However, a teenager that's interested in getting their first credit card will. Introducing new and age-appropriate concepts on a regular basis will give you child a better grasp of the full scope of good financial planning. 5. Provide an allowance – with conditions. Giving your child an allowance is a great way to introduce them to the concept of saving and budgeting. Treat the allowance the same way a bank would; avoid giving the child 'advances' on their allowance in favour of better long-term planning and spending. Consider supplying them with opportunities to earn additional money by performing tasks outside of their regular chores, as a reflection of the working world. 6. Involve your children in family financial discussions. While it's never a good idea to bring a child into a stressful financial situation, you should give them the opportunity to weigh in on certain household purchases that impact them – such as everyday expenses like groceries or debating a major purchase. This helps them understand the idea of trade-offs and the realities of your household budget. 7. Talk about budgeting and prioritizing. Many children struggle with the difference between 'wants' and 'needs'. If you provide your child with money outside of their allowance, enforce that it goes toward things that are truly needed, like lunches or school clothes. Set ceilings for what you're able to spend on an item – for example, you may be willing to purchase a base model cell phone for your child, but if they want to upgrade to a newer or flashier model, they'll have to budget for and spend the money themselves. 8. Be upfront about what you're prepared to provide. Your child's finances aren't just about their funds – it's about yours. It's important to be upfront with your children about what you're able to contribute and why. The more they understand your financial situation, the less likely they'll be to ask for things beyond what you're able to provide – from university tuition to cell phone bills to transportation. 9. Encourage financial independence and household contributions. When your child is able to get a job, encouraging them to get one will quickly demonstrate the very concrete realities of earning and spending money. With more children living at home into young adulthood, prepare them for life on their own by having them contribute to household bills and costs through either a flat 'rent' rate or by covering a percentage of your overall expenses. 10. Help your children understand money isn't everything. Rampant consumerism is instilled in children from an increasingly young age these days. With kids as young as two or three interacting with technology, it's essential to teach your children to value more than material goods as they grow up. The concept of 'making do' is an important one to learn from an early age.   » For further information readFinancially speaking: Are We Setting The Right Example?  

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