Money Matters

Most would agree with the importance of equipping our children with some degree of financial know-how. After all, it is a crucial life skill. My parents, typical of their generation, were both savers. They were careful with their money, but then, they had to be; they were raised during the Great Depression and every penny counted. It wasn’t uncommon back then for children, even young children, to work outside of the. Everyone pulled together for the sake of the family.

Nowadays, we are bombarded by advertising, if not on the TV, then on billboards, buses, computers—even in bathroom stalls! As a parent, how do you counteract that?

In this disposable, “I want it all and I want it now” society, how do we teach our children the value of a dollar, let alone healthy financial management? The trick, I believe, is two-fold: 1) start early and 2) be sure to model healthy financial management.

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When I was raising my own children, I missed the boat. Take chores for example. I didn’t institute household chores and an allowance system to go along with them until my sons were 12 and 10. By then I had lofty goals of showing them how to save their own money. To my dismay, my plan failed miserably.

For one thing, it required constant vigilance and supervision to make sure the chores were actually done because half the time, my sons “forgot” or had some silly excuse. The rest of the time, I had to nag them to death. In the end, I decided it simply wasn’t worth the effort, so I abandoned the system after only a few exhausting months.

When I look back on it, I think the failure was due to the fact that I started far too late with my children. So my advice is to start when children are very young. Initially, they can contribute to the family through simple jobs around the house: taking recyclables to the recycle bin, putting away their coat and shoes when they enter the house, picking up their toys etc. A three-or four-year-old can be taught these tasks.

As they grow older, young children can be tasked with other jobs and a monetary reward with rules can be set up around that. I’ve often heard of the “Rule of Thirds”—save 1/3, spend 1/3 and contribute 1/3 to the family. In this way, a child learns to save for big purchases they want and their contribution to the family can go towards things like family movie nights or vacations. This rule of thirds could even be kept in place when a teenager gets their first real job, as by then, they would be used to contributing to the family.

Even if a parent doesn’t believe in an allowance system on principle—and I’m sure some parents don’t believe in paying their children for helping around the house—there are still many ways in which children can be taught how to save the money they do receive (for example, birthday or Christmas money). Having them set this aside in their own bank account for example is one idea. Most children love to have their very own bank account and it is an excellent way in which they can be taught the concept of earning interest.

Budgeting is another financial skill that is important to teach our children before they strike out on their own and I’m happy to say I did much better on this subject with my own children. My oldest son enrolled in accounting, so there was no need to help him, of course, but I did take aside my younger son once he landed his first job upon graduating from university. At that point, I showed him how to set up a simple budget—how to lay out all his monthly expenses and how to save towards short-term and long-term costs. He has been on his own for almost a decade now and I was thrilled to learn recently that he still uses the same budget I laid out for him all those years ago!

As parents, our own financial management has a profound effect on our children. If we want them to be able to manage their money someday, then we need to make a concerted effort with the example we set. This means taking a close look at what we demonstrate to them, not only in terms of spending, but also in terms of saving and stretching a dollar. There are many easy ways in which we can teach children the value of a dollar—turning off lights for instance to reduce hydro costs, or walking/biking/busing to save on gas, eating out as a treat instead of a weekly occurrence, and buying second hand in order to save anywhere from a third to half the cost of new. And how about repairing/fixing things instead of disposing of them if it’s cost effective? (I remember my grandmother darning socks and my mother ironing on knee patches!) Lastly, and perhaps hardest of all, is simply making do without.

All of us want our children to be successful in life and to manage financially is part of that. We strive to equip them with a tool kit that will hopefully serve them well in life and what better tool to have than some financial know-how?

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Susan Gnucci
Susan Gnucci is a local author and a proud “nonna” to an adorable four-year-old grand-son. She enjoys sharing her experiences as a first-time grandparent.
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