Financial literacy is one of the most important skills you can ever learn. However, a financial education is not something that’s regularly taught in schools, despite the huge impact money has on our lives. Increasingly, people in North America have more and more responsibility for their own financial futures as jobs offer fewer benefits and pensions, and the onus to save for retirement falls squarely on the individual. Meanwhile, the financial landscape has gotten increasingly complicated. Money management is not something that comes intuitively to people.
As a parent, you might be wondering what age do you teach kids about money? The short answer is quite simple. It’s never too early, and it’s never too late. But you’re not about to start explaining how compound interest works to your three-year-old. Here’s a brief guide to age-appropriate lessons that will make your kids smarter about money.
Earning, Spending, and Saving
The first lesson you can teach to 3- to 5-year-olds about money essentially boils down to this: it doesn’t grow on trees. It’s a lesson they’ll probably learn when they want a toy that’s too expensive or a snack at the grocery store. When you explain why they can’t have it, it’s a great opportunity to talk about earning, spending, and why sometimes you have to save money before you can buy the thing you want.
As they get into the 6-10 age group, you can start putting these lessons into practice by giving them an allowance for completing chores and opening up a bank account for them.
Budgeting, Debt, and Consequences
Poor spending decisions come with consequences. As kids enter middle school in the 11-13 age, it’s time to teach them about debt, interest charges, and the principles behind borrowing money. It’s also a good age for teaching them how to budget.
Adults often only learn about the consequences of borrowing money when it’s too late. Fortunately, there are mechanisms for helping people get out of debt if they’re overwhelmed by it. You can find credit card debt relief in Canada through Debt Consolidation Programs that offer interest-relief and stop collection calls.
As kids enter high school and become teenagers, you can start introducing topics like building wealth, retirement savings, and saving to buy a house. This is the age when kids can start to learn about investing, the difference between stocks and bonds, and how compound interest can work toward saving more money than they would be able to save on their own.
This is also when kids are first able to get a job. The more they know about saving and building wealth, the better. Consider giving them a savings bond as a graduation or Christmas gift.
The Ins and Outs of Credit
By 15-18, teens are gearing up for the real world. They’ll be able to qualify for a credit card and, perhaps most importantly, they may be about to borrow tens of thousands of dollars in student loans. Now is the time to teach them about things like good debt (asset-building debt) and bad debt (high-interest debt, debt spent on consumable goods). Now’s also a good time to teach them about taxes. A great practical activity would be sitting down with them and filing your tax returns together.
When you teach your kids financial literacy, you’re giving them skills that will benefit them for a lifetime.