It’s no secret that many people wish they were taught more about financial planning in school, having graduated being none the wiser about how to budget, save or invest. Chances are, you learned the realities of managing your money right when financial independence was staring you in the face. How differently would you have planned your finances if you had known what to do at a younger age?

Once you’ve learned these lessons for yourself, of course, you want to help your kids learn about money to set them up for success in the future. So how do you implement these educational moments in engaging ways? The best approach is to tailor the activities to their age group.

 

Ages 3 – 6

Use a clear piggy bank

While any form of piggy bank is a great way to teach saving habits, it helps for kids to see how much money they are accumulating. Help them to get excited about what they’re putting in there by teaching them the different coins and notes and praising them when they add to their growing bank.

Show them how money works

Instead of saying “that doll costs $10,”let them take some dollars out of their piggy bank and hand the money to the cashier. Going through these motions will help them understand the concept of exchanging money for things they want.

Teach them to earn things they want

Have your child pick out a reasonably priced toy, then explain that they will need to save to buy it by putting money in their piggy bank. Give them ways to earn the money, through chores or good behavior, and help them count their savings until they have enough for the toy. Make the purchase a celebration.

 

Ages 7-11

Establish an allowance

Rather than just giving your kids an allowance, decide on an amount that they will earn through doing set chores around the house or even setting up a business like selling cookies or hand-made crafts. This helps them to understand the concept of earning money and entrepreneurship and will instill a sense of pride and accomplishment to know that their work and talents were rewarded with something as useful as money.

Set up a savings account

As they start to accrue small amounts of money, it is a great point to teach kids about having a place to keep their earnings. This will introduce them to the world of financial institutions (like credit unions) and give them a sense of ownership over their money. Children under the age of 16 can open a Youth Savings account at any credit union and receive free financial education and.

Introduce saving habits and teach opportunity cost

Having a savings account gives kids a place to store and save their money as they earn it. To encourage a habit of saving, have them set a longer-term goal for something more expensive than the toys they may have wanted in the past. Having an enticing item will spur them to continue saving and give you a goal to reference when they are tempted to spend their money on other things. This will introduce them to opportunity costs – things they are giving up today to save money for something they want more.

Saving challenges like the one below are a great tool to give kids a visual representation of what they get out of putting their money away each month

 

Ages 12 – 17

Explain compound interest

As your children get older, you can introduce the more complex aspects of earning and saving money to them. This is where they see the real benefits of being financially savvy!

Enter a number into a compound interest calculator and explain how much money they will earn if they started today and invested a certain amount regularly for the next 50 years. Seeing a tangible number, rather than just hearing the concept, will prove more meaningful.

Build on concept of investing

A great way for kids to begin learning how investments work is to create an investment system of your own at home. Have your child put a set amount of their money into a separate account and offer to match a percentage of it every time they make a deposit.

Once they’re a little older, consider opening an investment account for them and have them help research a few stocks or investments that you could purchase on their behalf. It’s encouraging (and engaging) for kids to recognize products from the companies in their investment portfolio and knowing they have some ownership in the company may spur them on to learn more about trading and investing.

Encourage them to find a job

Getting your first job is a huge milestone in anyone’s life, and even if your family is comfortable financially, encouraging your kids to earn a wage will instill a healthy work ethic and make money management a necessity. Teenagers are never short of things they want or need, so what better way to learn good saving and budgeting habits than making (and spending) their own money?

 

Age 18 and beyond

Discuss how credit works

It’s important to have open discussions with kids about how credit works, the risks of bad credit and how to properly use a credit card. A great way to do this is by pulling your own credit score and explaining how you got there and the impact it has on your family.

Give older kids lessons on what credit scores are and the importance of having a good score when they would like to borrow money to pay for school or buy a car or, even when they want to rent an apartment. Teach them that behaviors, like paying bills on time or opening one credit card that they pay in full monthly will increase their score, while missing payments or opening several lines of credit and accruing debt will lower it. [will insert link to our credit article once it’s up on the site]

Help them plan a budget

As your kids have more control over their money, help them to formulate a budget that works with their lifestyle and still allows them to save. This could be a good time to investigate low interest credit cards with no annual fee so they can start building a healthy credit score. Explain how important it is to only charge what they can afford to pay off in full each month, something you can facilitate through their budget.

Meet with a professional

If you are a member of a credit union, financial counsellors are available to give free advice and coaching to you and your family members. They can help explain things like IRAs, 401ks and trusts in a way that young adults understand. Teens may also feel more comfortable talking to a finance professional about their money goals, so this could be another opportunity for them to establish a financial plan and budget.

 

Teaching your children all they need to know about finances requires consistent time and effort, but knowing they are capable of successfully managing their money in the future will be the ultimate pay off.

Many credit unions sponsor financial reality fairs for high school students, so encourage your child to attend as they are an effective way for young people to learn how their choices impact their financial situation and, in turn, their future.