Island Savings

Teach kids about money management as young as three

Parents can begin lessons in money management with kids as young as three

September 1, 2015

Victoria, B.C.—With the return to classes, brown-bagged lunches and regular learning routines just around the corner, there’s no better time for Island parents to focus on their children’s financial know-how. 

“Money management isn’t a subject that most schools focus on, and so it’s really up to parents to teach these foundational skills,” says Barbara Fabian, a financial planning expert at Island Savings’ Mayfair branch.  “This means talking comfortably about money, modelling good savings behaviour and involving your children in household financial decisions so they can learn first-hand that compromise is what money management is all about.”

Research suggests that children’s financial habits are formed as early as age seven, signalling a need for conversations about money to begin as soon as a child is old enough to understand the basic concepts.  From age three to five, these lessons can include the difference between saving and spending, what a need is versus a want and the idea that sometimes you need to wait before you can have something—a lesson easily demonstrated with saving, spending and sharing jars.

“Encourage your child to divide any money they receive equally between these jars and then help her regularly count up how much she has in each, using the spending jar for small purchases, the savings jar for a larger goal and the sharing jar for charitable giving,” says Fabian. “Kids love this kind of playful, repetitive behavior and she’ll get to see her money grow in a really visual way while you talk about the goal she’s saving for.”

Between age six and 10, financial skill-building should grow to include candid explanations of your decision-making process in everyday situations (choosing between brand name and generic products in the grocery store, for example—or calculating your family’s savings when buying in bulk).  It’s also an essential time to give kids a bit of money to learn with, while tweens and young teenagers can begin to understand compound interest and the difference between good and bad debt. 

Fabian also recommends that parents avoid linking weekly allowance to household chores.

“Chores are a part of life and living with people in a home,” she says. “When you tie money to jobs, kids eventually realize that they can skip the chore and get money elsewhere—or maybe they just don’t need money for something in a particular week.

“The best financial help any parent can give their child is information and experience—and your financial advisor can help you identify everyday teachable money moments if you’re unsure of where to start.”

 

About Island Savings

Island Savings is a member-owned financial co-operative, providing banking, investment and insurance services for residents and businesses throughout Vancouver Island and the Southern Gulf Islands. As a division of First West Credit Union, B.C.'s third-largest credit union with $10 billion in assets, 250,000 members, 53 branches and 38 insurance offices throughout the province, Island Savings brings innovative products, an extensive branch network and local decision making to the banking experience. For more information on Island Savings, visit www.islandsavings.ca.

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