How to Teach Kids to Save Money and Avoid DebtMar 28, 2018
If you’re a Canadian parent (especially a Gen-X-er), there’s no shortage of challenges. Rising interest rates, childcare costs, low wages, and ageing parents are just some of those challenges. Our Licensed Insolvency Trustees (LITs) agree, and in this month’s podcast, they talk about debt, spending, and how to teach kids about money. Here are two of the ways they suggest you get your kids interested in saving money:
1. Explain the limits of earned money
You child might know that you have a job, but they don’t necessarily know that regular living expenses, planning for the future, and emergencies often cost more than what you make.
Depending on your child’s age, your earnings could seem equivalent to a million dollars–but you know it won’t go nearly as far, which is why saving is so important (and why they can’t always have the toy at the check out).
One way to give them context is to tell them how much you make, and how much your expenses are. Consider opening up your finances to show your child the real figures, and the efforts it takes to make your dollar stretch everywhere it should.
Check out this New York Times article by Ron Lieber about sharing your finances with kids to give them perspective.
If you aren’t already using a budgeting tool, consider using Mint to organise your finances and show your kids the visual to help them understand where the money goes, and why.
2. Get them earning–and thinking
Seeing the numbers and the graphs is only half the equation.
Help your kid make more connections by putting money in their hands and challenging them with how to manage it for their own future (a task the B.C. K-12 system is focused on now more than ever).
Talk about the different things their budget should include: savings, investing, spending. Challenge them to set out specific and attainable financial goals, and commit to sitting down with them every month to help them keep their goals on track.
Once your child is ready to earn some money, here’s some info on setting up a savings account.
Knowing what you already know about life’s financial challenges, starting to work with your child now to help them avoid their own debt in the future is one of the best financial gifts you can offer them.