Introducing our children to personal finance may be challenging. Sandra Jacques, Advisor, Personal Banking Services at Laurentian Bank, has some tips for you!
Managing our personal finances is probably one of the most abstract and difficult concepts to broach with our children at a young age. As they grow up, they realize they can't always get what they want, when they want, because things cost money. Back-to-school season is the perfect time to talk about this. Here are Sandra's three key tips to help our children understand the value of money:
The earlier you can have a conversation that directly or indirectly concerns personal finances, the better! This will give your children the opportunity to gradually internalize these concepts, rather than having to deal with them once they're on their own. When school starts, you could set a routine by giving them some responsibilities in exchange for an allowance. Based on their age, managing a small budget for lunches and snacks or outings with their friends is a good way to learn how to manage money responsibly. If your children have just started their first job, you can help them set a monthly budget to show them how to properly manage their income and expenses.
Talk to your children about what they would like to do and have. What are their projects? When they're still very young, their projects may be as simple as, for example, getting some new Lego blocks to add to their already overflowing box. Later on, it might be a scooter to have fun with their friends, and eventually their first car for more freedom! After identifying a goal, talk about how to reach it. How much will the project cost? Are mom and dad willing to help out for part of it? Are your children ready to dip into their savings (money received as a gift, saved allowance) for this project? A good way to help children understand the value of money is to ask them to shoulder part of their project's cost.
It may be worthwhile to include your children in some conversations about finances so they may understand the value of money. For example, when purchasing school supplies, you can look at the list of what's needed together and make a budget. Once at the store, you can put your children in charge of managing the agreed-upon budget and get them involved in choosing items and styles. You can also lead by example by being mindful of your own expenses and financial habits. After making a decision regarding the family's finances, like planning for a vacation, you can talk about it with your children and explain why you made such a decision, along with all factors taken into account. When they're still young, it's better to start with things they are already familiar with. As they grow up, they will be better prepared to understand more difficult decisions and develop sound financial management habits in adulthood.
Ultimately, there's no one-size-fits-all approach or set of guidelines on how to explain finances to your children, as each family is different, and each child has unique learning capabilities. The key is to proactively show your children how important it is to have sound financial habits to get started on the right foot!
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