I was so shocked this year when I realized that a large portion of students in Grade 4 still couldn’t answer the simple question, “What could you buy for $1.50?” As a result, I felt compelled to write this “Financial Post”. This one, is for you parents!
In 2016, the BC Ministry of Education rewrote their math curriculum to include financial literacy concepts at younger grades. Children as young as kindergarten are now taught about money as well as important concepts such as earning, spending, saving and giving. While I think this is definitely a move in the right direction, I would like to warn parents that although schools may be adept at teaching students numeracy; the true lessons of how to become financially literate, need to be taught at home.
“Parents are the number one influence on their children’s financial behaviors, so it’s up to us to raise a generation of mindful consumers, investors, savers, and givers,” Kobliner, 2013.
Children learn from observation, instruction and practice; and research shows that their financial habits are formed by 7 years of age (Forbes, 2013)! Children as young as 3 can understand simple money exchanges and children by 8 years of age have formed many ideas about money already, although harder concepts like compound interest and mortgages aren’t truly understood until adolescence.
Although children can learn monetary concepts such as counting, conservation, equivalence, and exchange at school; it is only through modelling and practice that true financial understanding comes, and that needs to be imparted at home. So what are the habits you would like your children to have? Only you can decide what is right for your family, but here are the 5 lessons we have decided to pass on to our children and some activities we use to do so.
1) “The best things in life are free.” Anonymous
More than anything, we want our children to realize that money doesn’t buy you happiness and that the best things in life are truly free. Love, friendship, and nature are just a few things that will fill your heart with an enduring joy, without putting a dent in your cheque-book. Teaching this is easy: do lots of activities with your children that don’t involve spending money.
2) “Money doesn’t grow on trees.” Anonymous
I want my children to know that money is a finite resource and that it takes hard work to acquire it. A great way to teach this, is to set limits and have your children stay within them. For example, while grocery shopping, give them $20 to buy fruit for the week: what decisions are they going to have to make? Another method is souvenir money. When travelling, we give each boy some money to buy souvenirs. During the trip they continually practice math while calculating their options and then get to spend their money on the last day. This helps them learn to delay gratification and to refrain from impulse buying. Vacation-activity budgets are another method of teaching children limits. We set a budget of $100 for activities during the holidays which forces them to be selective with their choices. This also helps them to appreciate that some activities are more expensive than others, and some activities don’t cost a cent!
3) “Never spend your money before you have it.” Thomas Jefferson
I want my children to understand that you shouldn’t live beyond your means or that will result in debt that may be difficult to get rid of. To teach this, take advantage of your child’s wants. Rory wanted to get fish with his birthday money so we took him to the store and had him research everything he needed. We were all a little surprised when his estimate came to $150! Who knew getting an aquarium was so expensive! He adjusted his budget by getting rid of extras and looking for cheaper replacements, but he still had to wait two more months until he had enough money to buy it. Not only did he learn: never spend your money before you have it; he also learned that sometimes you have to wait before you can afford the thing you want.
4) “A penny saved is a penny earned.” Benjamin Franklin
I want my children to learn that there are advantages to saving money. Some of the benefits are: you will have money available for unexpected expenses, you can save for more expensive things, or you can even earn interest. This year we are going to start paying our kids interest for their savings (which isn’t a lot!). Every week they don’t spend it, we will add some interest to their piggy-banks. We use transparent jars to make the earnings visible so that the kids can literally see their money grow. It doesn’t need to be a lot, it is the concept that matters! When they are older and able to comprehend more abstract concepts, then you can accomplish the same thing with a bank account.
5) “We make a living by what we get, but we make a life by what we give.” Winston Churchill
I want my children to realize that if you have money, it is good to give some away. To teach this, we look for opportunities to give to others. It doesn’t have to be money at this point, just the concept of giving. Every now and then we get the boys to pack up some of their old toys to give away. Food drives, clothing drives, and Christmas hampers are other options, but make sure you involve your children and they join you in giving the articles away. With respect to giving away money, model this behaviour by discussing your tips and donations with them.
“…children, being essentially social learners, acquire cultural practices effortlessly and gradually assimilate ‘‘values, attitudes, standards, norms, knowledge, and behaviours that contribute to [their] financial viability and well-being’’ (Schuchardt et al., p.86, 2009).
It takes a village to raise a child, and in terms of financial literacy, this couldn’t be more true. What kind of adult do you want your child to be? One that calls you borrowing money every week, or one that understands the importance of a dollar and how to save it? What opportunities can you provide today to help teach your children to become financially literate? Could they count your change to see if you have enough for a muffin? Could they decide between two brands of cereal? Could they earn some credit through a few good deeds? Could they tip the barista for his friendly service delivering their hot chocolate? Make sure you involve your kids in financial decisions and conversations every chance you can.
Want to learn more? Here are a few links to other articles on teaching children about finances.