Finance 101 for Kids

Money is a topic that's often hushed up in many households, but it's arguably one of the most important lessons that we can teach our kids to prepare them for adulthood! (Because we know they’re not going to learn how money works in the classroom!)

Start with the Basics

When introducing the concept of money, start simple. Use real-world examples. For instance, let your kids know that the delicious ice cream they enjoy on sunny afternoons, or the colourful Lego sets they love to build, all come from money that you work hard to earn.

Give Commissions, Not Allowances.

Ramsey Solutions recommends not just giving your kids money for breathing, but to reward their hard work around the house with commissions for the chores they complete (mowing the lawn, cleaning the dishes, etc.) Dave Ramsey and his daughter Rachel Cruze talk a lot about this system in their book, Smart Money Smart Kids. This concept helps your kids understand that money is earned — it’s not just given to them.

Teach Them to Save

Saving can be a hard concept for kids to grasp, but it's an essential one. One approach can be using clear jars to represent different categories: spending, saving, and giving. Each time they receive their allowance, show them how to distribute their money among these jars. This way, they can visually see their savings grow and make more informed decisions about how to use their money.

The Magic of Compound Interest

As the kids get a bit older, it's time to introduce the idea of investing. Make it fun though. How about a compound interest challenge? Have them save a certain amount each week, and at the end of the month, add some "interest" to their savings. They'll see how their money can "grow" over time.

Open a Bank Account

When they're ready, take them to the bank and open their first checking and savings accounts. This will not only make them feel grown-up, but it will also teach them about the banking system and how interest works in a real-world setting. Share how their clear jars have now changed form into banks accounts!

The Gift of Giving Back

Encourage your children to use part of their allowance to support a cause they care about. Whether it's donating to a local animal shelter, buying a meal for someone less fortunate, or contributing to a charity that resonates with them, it's important they learn about the joy and responsibility of giving back.

Budgeting Bootcamp

Finally, and perhaps most importantly, teach them about budgeting. Show them how you plan the family's monthly expenses, and help them create a simple budget for their own allowance.

Remember, the goal isn't to make them financial wizards overnight, but to build a solid foundation for good money habits over the long run.