Posted on Thursday January 31, 2019

Children's Financial Education Starts at Home

Do you talk about money with your children? Explaining how finances work to children while they?re young, in their own words, is something that starts at home. When you explore the topic, here are four main questions that your children may ask.

1. Mommy, Daddy, when will I have my OWN money?

It?s never too early to start teaching your children about finances. They?re sponges when it comes to learning! According to one Cambridge University study, children seven to eight years of age already grasp a number of key concepts that will guide the formation of their financial habits. After they reach school age, instead of giving them money on the spot for impulse purchases, start giving them a small allowance every few days for them to save or spend as they like. This is the best way to teach them the basics of sound financial management.

Here are some questions to ask your school-aged children to start a conversation about saving money and buying things.

• What types of things do they want that cost money (concert tickets, video games, special articles of clothing, sports gear, etc.)?
• What do they think is the monetary value of their possessions and activities (for example, the cost of a PS4, a ball, a doll, a ski outing, a trip to the water park)?
• How do they plan to go about buying that expensive Harry Potter Lego set? Are they willing to use their birthday money to cover part of the cost? Will they save their allowance for a certain number of weeks toward the same goal? Can they settle for a less expensive game if they don?t have enough saved up? Are there odd jobs they can do to ?earn? more money?

Keep in mind that it?s important for them to look at their own wants and needs and learn how to save their own money. Putting money aside on their own in order to buy items they really want helps to foster children?s sense of pride.

2. Why do people put money in the bank?

Watch the video ?Where does money come from?? with your children to give them an excellent overview in less than 2 minutes. It responds to questions such as ?Do financial institutions produce as much money as people want??, ?Does money appear by magic?? and so on. Explain to them in simple terms how savings and interest work. Of course, you?ll want to adapt your approach based on your children?s age. Use their own words and concrete examples to help them understand slightly more complex concepts.

3. Mommy, Daddy, why do I need a password?

Your children will begin learning a very early age about managing money online, which comes with certain potential dangers in addition to the many advantages. Teach them how to use various tools to keep their account secure and to protect their access by using effective passwords. Watch the video ?School Caisse: Log on? with them to help them understand the importance of protecting their data and personal information online.

4. Why do I have to start saving money when I need a PS4 right now?

Start by explaining the difference between ?wants? and ?needs? to your children. Having a PS4 is a want (not a need!). Remind them about the basic needs in life, like having a roof over their heads and food to eat, going to school and so on. You may even want to bring up the topic of registered educational savings plans (RESPs). Explain why you?ve been putting money into a fund for their studies. Talk to them about growing up and the importance of planning for the future and unforeseen events. This can be an excellent way to begin talking about their interests and options when it comes to schooling as well as the different ways people save money.

Use the various videos available on the UNI website as starting points for exploring these topics with your children in a fun, age-appropriate way. Their financial independence in the future will be built on the foundation you provide them while they?re children.

Good luck and have fun!