Families, Planning for Next Year

Kids and Cash: Help make managing money make sense for them

As parents we all must eventually help our children deal with money they earn or are given, while they are young.  We need to help them make smart choices and, of course, we need to let them get a little crazy with it sometimes too.

Your children might get money throughout the year by way of an allowance, a first job, or as gifts; so how can we help them manage their cash while still having some fun with it?

Let’s consider four key money practice points to work out together with our kids:  

  1. Spending: discuss with your child what you both think is a good amount for “mad-money” each week or with each pay cheque or gift.  This is their money to do with as they wish. Though we might want to steer them into making smart choices, which we should, the reality is we’ve all been kids blowing our money on candy and cheap toys.  It is a rite of passage, but doesn’t mean you can’t “influence” some better buying choices when you’re out and about and their cash is burning a hole in their pockets.
  2. Saving: most banks will give a savings account to your child if you yourself already have an existing account at that bank, and they are usually free until the child turns 18.  
    1. Set up the account so you can easily transfer money into it or deposit it at a bank machine or branch. Discuss with your child what percent or portion of their earnings they need to save each and every time; be realistic and make it simple for them to calculate.  Getting into this type of routine is a really good exercise, especially for kids with actual income from a job; we’re setting them up to be money savvy adults.  
    2. Come up with a savings goal.  Why are they putting this money away?  What will they use it for and when can they access it?  Saving to buy an expensive new toy is different from having them save for their education.  Be clear with your children on what this is for. For example, out of all the money saved they can use only 50% for future toys and the rest must stay for education; it is something you should discuss and decide together so they know as they save.
    3. Deal with the cash right away. If you’re like me and your kids wind up with cash after the holidays from relatives (while your wallet empties), buy some of their cash from them. Take the cash and then transfer the amount from your bank to theirs; I recommend showing them what you’re doing as you’re doing it so they understand why. Result is 3-fold…saved you from going to the machine for cash, the money is in their savings right away (harder to spend on junk), and your child sees a growing balance in their bank account and can feel a sense of pride.
  3. Planning: some toys and electronics are pricey and the reality is that many of us can’t afford a game system that costs $400.  You might not be able to afford it all yourself but perhaps combined with money gifts from others (your child can “crowd-fund” from family members instead of getting physical gifts), and with the money they’ve saved for this purchase they’ll have enough to buy it themselves. In one swoop we’re teaching a bit of budgeting, planning, and a healthy respect for the value of their toys as they had to lay out the cash; it also helps to enforce the reality that we are not a bank machine with an endless supply of cash for them.
  4. Giving: this is not just about philanthropy, but also about giving to others in their own friends/family circle.  
    1. Our kids primarily grow up receiving, so teaching how to give is a very valuable life lesson.  Whether we give cash or donate used items, learning how to give (and share) with those less fortunate is very important. It is also just as important to learn when you can or can’t afford to give financially.  As much as we might want to, sometimes it isn’t feasible without taking from somewhere else, like their spending cash or savings.
    2. Saving for Mom or Dad’s birthday (or any other event) can be another planning goal and can come from their giving fund, if that is how they want to structure it. Of course we don’t expect things from our children that cost them money, but teaching them to save to give, and doing something for someone else, is something that will benefit them as they grow up.  Like their savings, determine with your child how much cash they want to set aside for giving, and for what type of giving they will use it for and when.


Remember that our kids are sponges and watch everything we do, so make sure you’re setting the example that you want them to follow.  Involving your child in the decisions above creates a relationship of trust and honesty around money and will make them more confident in handling money as they grow up.  Financial literacy is essential for all of us; by doing this we are setting up our children for success.  

Keep it simple, keep it routine, and lead by example.