How to teach your children about money at every age

By ATB Financial 24 July 2020 6 min read

Talking to and teaching your children about money is important. Starting early and providing engaging learning opportunities for your children will help set the stage for healthy financial habits and financial confidence they will carry into adulthood.

The Financial Consumer Agency of Canada (FCAC) conducted a worldwide survey to determine financial literacy among teenagers. The findings showed that teens who talk about finances with their parents, even just once a week, score 33 points higher in financial literacy compared to those who do not.

Why is financial literacy important for kids?

Managing finances is a regular part of adult life, but it’s not something many of us were taught in school. Knowing the value of a dollar, budgeting, setting goals for saving and knowing how to spend responsibly are all part of smart money management.

And, teaching your children about money management will set them up for financial success in the future. Read more about the importance of teaching your kids about money.

Teaching kids about money at every age

Just like teaching any new concept, it’s essential to talk to our children about money in ways they can best learn and understand. Here are some ideas to help you start the conversation, and do some age appropriate learning activities with your children.

Early learning: Ages 3-5

Between the ages of three and five, kids should be just starting to learn the value of money.

Pre-schoolers can start to learn the value of a dollar. You can show them coins and dollar bills and get them to practice counting money. They can learn about earning money from doing household chores or receiving cash as gifts, and how to save it for something they want to purchase in the future.

Start teaching budgeting basics by using three jars: one for saving, one for spending and one for donating. This activity will show them how to start managing money at an early age.

You can also do activities at home that will help them understand the concept of spending money. For example, you can create a pretend store with items that have price tags. Then, give your children some money to “spend” in the store. Another fun idea is to do a baking project, but allow your kids to purchase each ingredient, so they understand that even simple things like flour and sugar cost money.

Banking terms to introduce include: spend, save, buy and sell.

Gaining more understanding: Ages 6-9

Children between the ages of six and nine should be able to distinguish between needs vs. wants.

Kids this age can start to better understand the value of money. When it comes to spending money, they can also distinguish the difference between a need and a want.

At this age, you can help your child set a long-term savings goal. For example, they can contribute a portion of their allowance to save for a large purchase, like a new toy. Help them open a bank account, so they can deposit money into their savings to help them reach this goal. Periodically, help them check their bank balance, so they know how far along they are in achieving that long-term goal.

Banking terms to introduce include: bank, account and balance.

Team ATB tip:

"When we go on holidays with our kids we give them a budget of what they’re allowed to spend on extra goodies and souvenirs. We couldn't afford to buy them everything they wanted in sight, and for those that have kids, you know what I mean... kids want everything they touch. So even at an early age, it made them really think about what they’re buying and if that item was really worth it."

-Diana, ATB Business

Gaining independence: Ages 10-12

Kids between the ages of ten and twelve want to start being more independent.

At this age, children can begin to learn the basics of budgeting. Budgeting includes understanding how much money they have coming in and how to account for what they spend.

If they already have their own bank account, you can review their transactions through online or mobile banking or a monthly statement. Looking at these transactions allows them to see how much they’re depositing and spending—and on what. This is also a great time to get them their own debit card.

You can also show them your family’s household budget. Seeing the budget will help them understand more about basic living costs like utilities, mortgage payments, insurance and other bills. Help your child create their own budget for the things they currently purchase.

Banking terms to introduce include: budget, debit card and statement.

Team ATB tip:

When our daughters were little and would state, "I want X", I would ask them how they were going to earn the money to pay for it? We would then negotiate what chores they would have to perform to raise the funds. If it was a very large item like a school trip overseas, then I would meet them halfway. If they raised $1500, I would match their $1500. They eventually stopped saying "I want" and would state, "Mom, I have a proposal for you..." I knew with those fateful words they wanted something, but they also had worked out a strategy of how they were going to pay for the coveted item. They are great savers as adults.

- Christine, ATB Wealth

Young adult territory: Ages 13-16

Technology is important for ages thirteen to sixteen.

Teens might already have a job at this age or be looking to get one. You can help them understand more about their earnings by reviewing their pay stubs. Here, they can see what part of their earnings goes to employment insurance, Canada Pension Plan (CPP) and to any potential income taxes.

You can also help them set up long-term savings goals that are more substantial, like purchasing a car or saving for post-secondary education. After setting the goal, help them create a savings plan so they know what they have to do to reach it.

With contactless payments and new digital payment opportunities on the rise, this is also a good time to explore options around different types of payment cards for online purchases or mobile pay opportunities. And, if that’s new to you as well, you can always learn together!

Your kids are old enough now to hear about your experiences with credit, debt and savings. Having an honest conversation about the tough lessons you’ve learned will help them understand the importance of proper money management.

Banking terms to introduce include: credit card, debt, mobile pay and taxes.

Preparing for their future: Age 16+

Budgeting for college or university is an important lesson for this age group.

As our teenagers grow up, they must learn about the expenses they’ll soon have. These include living expenses, vehicle expenses and the cost of post-secondary education. If they plan on attending post-secondary, start investigating the price of tuition, books and other costs, so they understand what needs to be in their budget.

Help them prepare a budget for their first year out of high school. Because of COVID-19, many post-secondary schools are offering online learning this upcoming fall semester. Online courses might mean your child can choose to live at home, saving on moving and living expenses. Discuss with them how they can use those savings. It might mean putting it into a savings account for future tuition costs, or creating a long-term savings plan and investing those funds.

Banking terms to introduce include: student loans, investments, stock market, credit score and the credit bureau.

ATB can help.

ATB Financial has resources available, including a money counting worksheet, to help parents and teachers assist with this. Please don’t hesitate to contact us for more information.

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