Begin teaching children about money
Start conversations about money early
Teaching children how to manage money will help them throughout their lives.
Start teaching children about money when they’re young. If you start early, you can build on their knowledge as they grow.
This way, children will learn how to:
- make good decisions about spending
- save for the future
- practise good financial habits
- use credit responsibly
- understand the difference between needs and wants
Make learning about money part of everyday life
Talk about money when your children are around so that they become familiar with financial words and ideas.
Use everyday activities to give lessons in managing money. When you’re out shopping or running errands, talk about:
- how you decide which products to buy
- why you bought, or didn’t buy, the sale item
- when you might buy an item individually and when you might buy it in bulk
- how you pay for the item, for example, with debit, credit or cash
Involve your children when shopping by getting them to:
- check for weekly in-store specials
- look for coupons for items on your shopping list
- check the cost of similar products made by different brands
- discuss the reasons behind differences in price
Talk about needs versus wants
Help children understand the difference between needs and wants. They should spend money on the things they need before the things they want. This will help them make good spending choices.
- needs include housing, food and clothing for the entire family
- you must use your money to pay for basic needs first
- wants are expenses you can afford if there’s money left over after paying for your needs
- wants may include restaurant meals and family vacations
Knowing the difference between needs and wants will help children understand:
- how to live within their means
- they can’t spend all of their money only on the things they want
- it’s important to save for the things they want
Teach children about making choices
Make sure your children understand that spending money is about making choices.
Help your children understand that when they spend money on one item or activity:
- they won’t have money to spend on something else
- they’ll have less money to save towards a goal
Teach children how much things cost
Help your children learn the prices of different goods and services. This will help them figure out what they can buy with their money.
Tell them about the prices of household items. This will help them understand how much money you need to earn to pay for household expenses.
Set a good example
Children learn by watching and copying their parents and guardians. Show your children good spending and saving habits so they learn how to manage money well.
Good spending and saving habits include:
- buying only things you can afford
- when shopping, making a list and sticking to it
- saving to pay for major purchases or activities
- following a household budget
- paying your bills on time
Let your children see you pay your credit card bill and other bills. If you do your banking online, explain to them what you’re doing.
Talk about where money comes from
Explain that the money you spend comes from:
- your employer
- social benefits, such as the Canada Child Benefit
- other sources, such as savings
Point out that people had to work to earn the money they give your child as gifts. Talk about different jobs people do to earn money.
Show your child your bank account or credit card balance. After you do some shopping or pay a bill, show your child your bank account or credit card balance again. This will help your child see how the balance changes when you spend money.
Payment cards are also money
Depending how you pay for things, your children may think you have unlimited money. This can come from watching you get money from an ATM. Or it can come from seeing you use your debit, credit or prepaid cards to pay for things.
Teach your children how a debit card works.
- your debit card is linked to your bank account
- there’s a limited amount of money in your bank account
- your debit card lets you pay for purchases with the money in your bank account
- your debit card lets you deposit or withdraw money from your bank account at an ATM
- there’s a limited amount of money in your account
Teach your children how a credit card works.
- your credit card lets you borrow money from the bank or other financial institution that issued your credit card
- there’s a limit to how much you can charge to your credit card
- when you use your credit card, you're promising to pay the financial institution back
- you have to pay the financial institution back by a certain date
- the financial institution records every purchase and needs you to pay it back for each purchase
Show your children your credit card bill. Explain that you have to pay extra money called interest if you don’t pay your credit card in full each month.
Teach your children how a prepaid card works.
- your prepaid card holds money on it like a wallet holds money
- there’s a limit to the amount of money on the prepaid card
Explain to your child that:
- when you buy something online, it still costs money
- the money for online purchases is taken out of your bank account or charged to your credit card account
Teach children how to save
Teaching children how to save can help them:
- learn how to be financially independent
- avoid over-using credit and loans in the future
When talking about saving with children, discuss goals that appeal to them. For example, they could save for a goal such as a video game or special activity.
As children get older, talk about saving for longer-term goals, such as saving for post-secondary education.
Discuss long-term and short-term savings goals
Talk to your children about short-term savings goals.
For example, they may wish to save for:
- a toy
- an item of clothing
- a special activity
Make sure they consider long-term savings goals.
- pocket money for a vacation six months from now
- a phone or tablet
- post-secondary education
Encourage children to make reasonable goals. Start with short-term savings goals so they don’t get discouraged.
Make a budget to reach savings goals
Help children calculate how much they need to save to reach their goal. Have them figure out how much they need to save each week or month, and for how long, to reach their goal.
Consider contributing to your children’s savings
You may choose to encourage your children to save by matching their savings. For example, you may agree to pay for half of the cost of an item if they save for the other half. Your children may be less likely to get discouraged with saving if you help them reach a savings goal more quickly.
Open a savings account for your children
A savings account is a tool that can help teach children to save. It’s a safe place to put their money when they’re saving for a big purchase.
Help your children open a savings account that pays interest. Many financial institutions offer no-fee accounts for children and youth.
Get your children to deposit money into their savings account
Encourage children to deposit their money into their savings account.
Have them make their own deposits at the bank. This will help them understand how deposits and withdrawals work.
Check monthly account statements with your children
By checking their monthly statements, children can see how the money in their account increases and how compound interest can make their money grow. It will also give them a good attitude towards saving.
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