Kids and money!
You have a kid! You have (some) money! You want your child to learn all about this money thing. What’s the best way to do this?
Let’s look at two main concepts: INCOME and OUTFLOW
Where does money come from? (Not from trees!) How can you get or earn an income? What are ways that people earn money? (Jobs, selling things) What are other ways to get money? (Gifts, lottery wins, investments)
OUTFLOW (AKA SPENDING/SAVING)
What is money used for? In your family, what are the things that money gets spent on? After the non-discretionary spending (ie. bills), what does your family choose to spend the money on (vacations, eating out, buying clothes, eating organic, doing activities, etc.). Can your children participate in any family money outflow decisions? Is there money outflow from the spending account into savings accounts?
TEACHING MONEY HABITS
* Talk about money (what it does, what it is used for)
* Use positive money language ("We are planning to use our money for <x goal>." "We are saving our money for <the weekend/restaurant/trip>, so we haven't planned to buy <that toy/new bike/eat out>") instead of "We can't afford it." or "We don't have (the) money."
This is a family's personal decision, but here are some generally accepted guidelines/steps regarding allowance (based on parenting courses/counsellor suggestions and my opinion, as a Certified Financial Planner and parent to a 5 & 6 year old).
Introduce tasks and helping out around the house *before* starting an allowance
Approach allowance as a way to share in the family finances and learn about good money habits
Don't tie allowance to chores (this is family-dependent, as many find this makes the most sense to them)
Talk to kids about goals/what they want to spend money on, save for, and where to give back (the Christmas holiday season is great for talking about sharing wealth)
Set guidelines for the money. We say 50% to savings (start the habit early). Spend/give as appropriate for your family (ie. tithing at church each week, money aside for donation to favourite charity/hospital/Go Fund Me).
Let kids spend the money; this means letting them make poor decisions/buy things you don't agree with
The spend money is theirs to spend. If they want to blow it on junky plastic, let them (unless there is a no plastic rule in the house). My kids like to spend money on ice cream in the summer.
Questions to ask an RESP provider