Teach Your Kids About Money At Any Age!

Whether your kids are in pre-school or high school, now is always a great time to teach them about money. Getting the conversation started and keeping it going is a great way to set your children up for success and to help them confidently handle and understand their finances. 

Create a Budget with your Child

Once your child starts managing their own money – whether they get an allowance, money for their birthday or income from a part-time job – it’s a good idea to create a budget together so that they can begin learning how to be a smart money-manager. 

 

• Identify Income and Deduct Expenses

 

To create the budget, start with your child’s income: employment, allowances, or gifts. Then deduct their expenses. These probably won’t be too numerous at this stage – maybe lunch, or a cell phone plan, etc. Beyond that, it comes down to entertainment expenses – movies, clothing and eating out with friends. It may take some trial and error, not to mention some negotiation, to get to a number that works for the budget and for your family.

 

• Allocate to Savings

 

Then, allocate some money to savings so that your child can start to learn the value of setting money aside regularly, rather than spending everything they earn. Identify a goal – something your child really wants – that will require “saving up” in order to buy. This is a great way to teach the value of saving to get something that’s truly important. 

 

• Consider Donations

 

Some families also add a line in their child’s budget for donations. Together, you can come up with an amount you’re both comfortable with.

Once the budget is set, let your child manage their money fairly independently, at least to start. Kids may make mistakes, such as blowing their money on something less meaningful instead of contributing to their savings goal, but these are lessons they learn as they go.

If you need some help getting started, your advisor can assist and there are some simple online budgeting and saving tools that you can use to get your child’s money management skills off to a strong start.  

 

Jennifer Taylor, CFP®, PFP, Financial Planner, RBC Royal Bank