We watch them grow, we see their development.  As parents we should be teaching them to develop their creative minds and learn finance management at a young age. Unlike the old days, children are much more technically inclined than most of their parents. They can find their way around a computer, tablet or phone much easier than most of us. Being creative can be done on so many levels, such as through a computer program to teach them how to colour or count or put faces together. On the flip side, I am a believer in old fashioned “use your mind”; give them paper and colouring items and let them go at it.

I’ve always said, “Never underestimate the intelligence of a child”. We just have to reach them at their level of understanding. If it’s to allow them go draw, write or colour. You can create a conversation around whatever activity you are doing with them. With toddlers or younglings, you can start a conversation with “So how much money you have in that piggy bank now?” or if you do not have one yet, you may say “So kiddo, what do you think of the idea of getting you a piggy bank, so you can start putting all that birthday & holiday money away?”

Piggy Banks:

Piggy Bank in check! So when your child wants something you can encourage them to understand the concept of that money. If you decide to purchase the item they are asking for, tell them you will pay a portion of the item and they are responsible for their share of the cost.

Here are a few little tips that may help them understand the fundamentals of money at a young age.

50% versus 10% rule of thumb! By making them pay for a portion of the costs, you are teaching them a much needed life lesson. To appreciate the fact that nothing in life is free, while learning critical life lessons about the value of money and that we can’t always buy everything we want, right when we want it. The sooner they learn this, the better off they will be later.

An expensive item:

This concept will be different for each household. Something they want may be feasible for you, may not be for others. Something that is worth $100 may be an expensive item for some households whereas other households may consider a $500 item expensive. So be aware that the dollar amount below will vary for each household.

  • $500 item: Explain that they will need to pay 10% of the item before you will go out and purchase it for them. This will not sit well with them at first and may even be tough for you as a parent, but these are the smart money choices they need to understand. So when they become teenagers and later onto adulthood, they will grasp the meaning of money, which will in turn allow them to make better financial decisions.

Less Expensive item:

  • $20 item: Get them to cover at least 50% of the cost.

With that said and done, you can extend their understanding by explaining the sales tax amount as well. In Canada, there is always sales tax that is added to the cost of an item, unless you are buying fruits and vegetables or other essential items. You can make a life lesson game out of it. When you are out shopping you can get them to understand. So go to your local market and purchase items that do not have sales tax, teach your child the difference between what is considered essential and what isn’t. Early lessons on what is important to have and what isn’t.

What to do with the money they give you?

  • Invest in an Registered Education Savings Plan – RESP: As a parent, the purpose is not to take your child’s money of course, but to teach them the concept of money management. Whatever amount of money they give you, put it aside, then once you have enough accumulated, put it in an RESP every year, less for you to have to pay later. And if you happen to be part of the millions of Canadians that are of the working class with lower income levels than others, than you may be able to access the Canada Learning Bond –  CLB program.
  • Open a Bank Account: Show them the money that is accumulated in their bank account. This will give them a sense of personal achievement, while understanding the concept of money management at a young age. They can watch their money gain interest as well.

So when they hit those teenage years, they can be proud of the fact that you managed to save so much for their education as they watched the money accumulated over the years in their bank account. This may be one of the best life lessons they learn. Understanding that all those years of their parents showing them how to manage their money, has paid off in a good way and they took part in it as well. With sacrifice comes rewards!

How do they get money?

Doing chores are a great way to teach them the concept of “earning” money. Take the garbage out once a week, clean your room, vacuum the living room, help fold the laundry. Little things like that will go a long way in the end. And if you have a bigger family then they can each take turns with certain chores. The littles ones will love the idea of helping and feel good while earning money. And the best part is, you are investing in their personal growth for when they end up on their own.

When I was a kid, my main source of money was babysitting. So I put together a little template. My name, looking to babysit and the amount I wanted per hour, which back then was about $2 an hour and $2.50 after midnight. We didn’t have home printers so I wrote each little piece of paper out by hand and handed them out, up and down my street and the surrounding areas. The best part were holiday times, because I could choose which one I wanted to babysit for based on the amount of money they had paid me over the year. I know it sounds funny, but that was exactly what I did every New Year Eve, wait for the phone to ring and choose the family I was going to babysit for. That was probably one of the first lessons of “entrepreneurship” I could come up with at the time. I also knew that doing a good job, meant that people would recommend me to their friends and so on and so forth. Earned quite a bit of money babysitting as a teenager.

There are various methods you can use to help your child develop their understanding of the world around them. By being creative, you will teach your child to do the same.