Financial literacy means understanding how money works in the world: how to earn, manage, save, invest, and donate it. This is a vital skill to have, and it’s my job as a parent to teach my kids how to manage money and credit so they don’t stumble into financial disaster in adulthood. As adults we have (hopefully!) learned to postpone gratification. We’ve learned to weigh wants versus needs, current wishes against future needs, and make thoughtful decisions about how we balance those things. Disciplined saving is one of my personal values and something I want to instill in my kids. Especially in these times, there is a lot of merit to saving up a nest egg for a rainy day.
Role Model Financial Literacy
I want my girls to learn to be financially responsible, which means I need to do the same. When I want to purchase a big item, I try to avoid buying on credit and save up for it instead. Another way I keep on track is through automatic saving. Every month, a specified amount is automatically withdrawn from my chequing account and deposited into my RRSP and into my children’s RESP. Every little bit, no matter how small, adds to our savings. And through the magic of compound interest, those small amounts make a big difference down the line. That’s how I’m saving for my future, and for my children’s futures.
Explain Money Decisions
I don’t necessarily talk dimes and nickels, but when it comes up naturally I try to explain why I’m making the financial decisions I’m making. For example, when Tee asks for a new toy, I remind her of all the toys she already has. I ask her, “If we spent all our money on toys, how would we buy food?” Very simple I know, but it helps to plant the seed that every financial decision is a trade off: if we spend our money here, we won’t have the option to spend it there.
Let Your Children Practice Saving
Encourage your kids to save at least some of the money that comes into their possession. Both my girls received personalized piggy banks at their naming ceremonies, and their birthday money and the money from their Chinese New Year red envelopes goes straight in there. Tee is very proud of how much she’s managed to save over the last couple of years. I’ve used this as an opportunity to start teaching her the names and values of the different coins.
Let Your Children Practice Spending
The flipside of saving is teaching them how to spend their money too. Let them take two or three or five dollars out of their piggy bank and head to their favourite store. Here’s where they get to figure out what their money is actually worth.
“Mommy! Mommy! Can I get that super duper annoying, loud, and ultra unnecessary toy of the week?”
“Well, let’s see how much money you have. Is this enough to buy it?”
“Well then I guess you’ll need to keep saving or find something else you can afford.”
I coach Tee through the transaction from beginning to end to help her learn how to navigate the checkout process. Of course this is best kept for when there isn’t anybody waiting behind you in line!
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