A few months ago, I talked about allowance charts for kids. Since this month is financial literacy month, I thought I’d follow-up and share some of the results I’ve seen from our chart system after I read a Globe and Mail article that discussed the best age to teach financial literacy.
The experts quoted in the article didn’t necessarily agree on the exact age you should start teaching about money, but they all argued it is good to start kids at a fairly young age.
In my opinion, a good, healthy relationship with money is something that should start from a very young age. Our kids are five and almost three. We started the allowance charts when they were both about two and a half.
We give our kids stickers for doing chores around the house. I don’t feel comfortable just handing them money. I think they need to understand that it is something you earn. They have a say in the types of chores they do, and we ensure the tasks aren’t too difficult. We’ve changed the charts a few times to reflect their opinions and input.
At the end of every week, we tally up their earnings (it’s anywhere from $1 to $2 a week). We pay them, and then have them deposit their money into talking piggy banks that tell them how much is in the bank. We also put money they receive from grandparents, etc. into the banks.
A couple of weekends ago, I decided it was time to use some of the money from their savings. They had both built up a decent balance. Before heading off to the toy store we had agreed upon, I set a budget (our eldest son was allowed $20 and the youngest $15), and told them both that we’d put the rest of the money into their savings accounts.
When we arrived at the store, it took them quite awhile to choose what they would like. As you can image, setting a young child loose in a toy store is a dizzying affair.
My five-year-old looked at 30 or 40 items. During the selection process, we discussed whether the price of every item was within their budget, and we talked a lot about value – how much he’d use the particular item and whether he would enjoy it. My younger son made his choice quickly, but still went through a few items before making his choice.
In the end, they both came in well under budget. They also bought items they are getting a lot of use out of – the youngest sleeps with “Zella”, the stuffed zebra. The eldest “races” his new car almost every night.
After going through this exercise, I’m finding it easier to explain to them why we don’t buy everything we see when we go shopping. For example, they were both coveting toy cars during a grocery-shopping trip the other day. I explained the cars weren’t in the budget, and my eldest stopped asking for them immediately. It took longer with the youngest, but that’s to be expected.
This week, we will head to the bank to deposit the money they saved to close the loop on the lesson. I will also talk to them both about making a small donation from their savings, to teach them about charitable giving.
My takeaways from this exercise are threefold:
- I realize that you can teach kids about saving and spending at a very young age.
- As they grow older, it’s easier to teach them about value and decision making when it comes to making purchases.
- If I want my kids to have a healthy relationship with money, I’m going to have to work hard to keep reinforcing these lessons. I will also have to think about new ways to talk about saving, earning, and charity, as they grow older.
Let me know about your experiences teaching kids about money.
There are a lot of lessons to be learned from reading the Canadian Securities Administrators’ 2010 Enforcement Report. Read, for example, the Alberta case called Kustom Design Financial Services Inc. This is a company which held seminars supposedly offering financial education. It was, instead, a cover for the illegal selling of securities to vulnerable investors. […]
Today, the CBC ran a story about the collection rates of financial penalties imposed by Canadian securities regulators. The size and total amount vary considerably depending on the nature of the case. BC’s rate of collection was considerably lower because BCSC imposed record-high penalties totalling $113 million in four significant investment fraud cases. […]