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    November 2012
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    Teaching Kids How to Make Healthy Financial Choices

    Tammy Johnston

    Every parent wants their children to grow up to be financially responsible. They want them to be able to look after themselves, achieve the Canadian dream of homeownership and financial security. The big question that the parent’s have is not what, but HOW? Unfortunately financial responsibility and literacy is not something that is taught in school. It is a task that falls under the area of parenting.

    Children and adults learn best when they actually get to deal with things themselves. The same is true for learning about money. I am a huge supporter of giving children an allowance and teaching them to divide it into five categories: Financial Freedom, Education, Long Term Savings for Spending, Charity, Gifts, and Play. If a child is not given parameters to work within they will spend everything, have very little if anything to show for it, and learn nothing in the process.

    My nine year old daughter gets an allowance of $12 a week. To make it simple for her to understand we give her six twoonies. I have used paying her her allowance as an opportunity to teach her about money and fractions for years. Now she is in Grade Four and has a very good grasp the concepts that are now being taught to her in math.

    Princess likes to ask me about the jars and we spend time discussing their different purposes. Investing is a bit above her nine year old comprehension right now, but she is curious about the concept. I have explained to her that each dollar is a money seed and her job is to plant the money seed in such a way that it can grow and produce lots of fruit. The education jar is used to buy books of her choosing from the Scholastic Flyer she gets at school, but Mommy does make suggestions. The charity jar is for things like putting money in the Christmas kettle manned by the Salvation Army at Christmas, putting it in the plate at church, or giving to the fundraising drives they have at her school. For Long Term Savings for Spending she is saving to buy a game for her Nintendo DS. The Gift jar is used to buy birthday and Christmas presents for her friends and family. The last jar is her play jar and every month she gets to take her money out, put it in her very own purse, and go shopping with Mommy. Her last purchase was a flowering plant for her room. If she wants to buy candy or trinkets at the dollar store I do not interfere. It is her money to do with however she chooses.

    Whenever she is deciding to spend the money in any of her jars, I make her physically count out the money and hand it over. I ask her questions like, “Do you want to spend all of this money on this one thing or in this one place?” Kids can be impulsive, so we need to help them slow down a bit and think through their actions. We are not giving them the answers, but helping them figure out what questions they need to ask themselves.

    Children are much smarter than we sometimes give them credit for. By providing them with the opportunity to make decisions, ask questions, and deal with financial consequences they learn to make better decisions. The earlier you start teaching them the better, but whatever age they are take the opportunity to help them grow into financially responsible adults.

    “The more your kids feel the allowance is fair, the more likely they’ll think before they spend. Giving your child the experience of spending his own money is empowering.”
    Jim Gallo

    The MONEY® Network