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Introducing your children to financial literacy is one of the best gifts you can give them. With a solid foundation in money management, they’ll find it easier to handle their finances as adults and avoid the pitfalls of too much debt.

The sooner the better

You don’t have to wait until your child can count to 100 to teach them the basics of money management.

Do you have a 3- or 4-year-old?

  1. Start by teaching them about coins and their values.
  2. Keep things fun by playing a simple game: lay out some coins on a table and ask your child to group them by type.
  3. At the end of the game, give them a piggy bank to put the coins in. This is a playful way to teach your child the basics of saving money!

When your little one turns 4 or 5, teach them the value of money by playing a shopping game:

  1. Place a few items, such as plastic fruit, on a play table.
  2. Set a price for each item.
  3. Give your child a handful of coins that represent their shopping budget. For example, if they want to buy an apple, they’ll have to give you 25 cents. You can use a toy cash register to make the game even more fun.
  4. After a few minutes, switch roles. Ask your child to play cashier while you become the customer.

Develop good habits in elementary school

By the age of 7 or 8, your child will have learned some math in school. This is the perfect time for your child to open their first bank account. They’ll be able to deposit any gift money they receive, and a portion of their allowance.

To show your child the benefits of saving, help them think of a short-term goal that will motivate them to put money aside regularly. For example, if they love video games, they might decide to save up for a new controller.

Review their bank statement together on a consistent basis so that they can see the progress they’ve made. Use this opportunity to talk to your child about interest and how it will help their savings grow.

Save money at the grocery store

Getting your elementary-aged child involved in shopping is another great way to introduce some financial literacy skills. Have them help you make a shopping list, then flip through flyers to find the best deals and coupons.

At the grocery store, have your child select some grocery items, such as cereal and yogurt, and teach them the difference between products sold in bulk and by unit.

Understand the value of material things

When your child is around the age of 9, start to involve them in the purchase of major items. For example, bring your kid with you to buy their next bike. At the store, explain that the bike shouldn’t cost more than $100. This is a great way to help children learn the value of various goods.

Learn the difference between needs and wants

When your child is in elementary school, teach them to distinguish between needs and wants. This skill will serve them well for their entire life.

The key is that they understand that all basic household needs (housing, clothes, food, etc.) must be met before moving on to the wants (video games, candy, toys, restaurants, outings, etc.).

To make these concepts more concrete, give them real-life examples based on your own circumstances.

How to use a debit card

By the end of elementary school, your child will probably be mature enough to start using their own debit card. Start by showing them how an ATM works.

Be sure to accompany your child when they make their first debit card purchase. Don’t forget to talk about their PIN, the secret code they’ll have to remember. It’s essential that they understand what security measures to follow when using their debit card and that their PIN must be kept confidential.

Moving towards financial independence

Your child’s first paycheque

Many teens get their first job during high school, whether as a babysitter, clerk, or cashier. Your child’s first few paycheques will probably be more than the allowance they’ve received up to now, so be sure to reinforce the importance of good financial habits.

For example, encourage them to use automatic transfers to save more easily for a short- or medium-term goal.

Online shopping

Does your teen have their heart set on an item that’s only available online? If you think it’s a good buy, use the opportunity to give them a crash course in online shopping. Explain shipping costs, payment methods, customs fees, delivery times, and the risk of scams.

When your child reaches the age of 16 or 17, take the time to give them an intro to credit cards. While they aren’t old enough to have one yet, they may be tempted to sign up for one in the near future. Topics that should be covered include the following:

  • Interest rates
  • Annual fees
  • Minimum payments
  • Due dates
  • The importance of paying off your balance in full every month

You can make this exercise more concrete by letting your child look at one of your credit card statements.

At this age, your teen could probably also benefit from gaining a basic understanding of credit scores. Teach your child that strong financial habits help to build a good credit history, which is helpful when the time comes to buy an expensive item, like a car or house.

Everyone learns at their own pace

There are many ways to introduce your child to financial literacy. Just remember that whatever their age, you should always respect their learning pace. Adapt your advice to their temperament, and don’t rush things.

Keep in mind that your child is likely to mimic your approach to money management, so it’s important to adopt healthy financial habits of your own, especially when it comes to budgeting and managing credit.

Key takeaways

  • Preschoolers will enjoy playing with coins, and it’s a fun way to introduce them to financial concepts.
  • Open a savings account for your elementary-aged child and encourage them to put some of their spending money into it. This will help them learn the basics of saving.
  • Remind your working teen about healthy money habits and talk to them about credit. Encourage them to save by helping them choose a realistic short- or medium-term goal.