The other night at the dinner table, my husband made a casual comment about the cost of living and my daughter flippantly said: "I'm stressed out about dealing with bills when I'm older." Bear in mind, she is 13 and can be a bit over-dramatic, so when she says "stressed" she really means that she can't fully wrap her head around the idea! It opened up a great conversation and my husband and I started listing off some of the costs associated with having a car, renting an apartment, getting a driver's licence and more.
We explained to her and her 10-year-old brother that they will progress into these things slowly, when they are ready, and it won't seem as daunting when they are prepared. Talking about money with your kids is a great start, but what other ways can we demonstrate what life really costs and prepare them for the future?
Start Financial Literacy Early
Begin when they are young by playing games like pretend grocery shopping and use fake food and money, plus a toy cash register or calculator. Work up to playing board games that help kids to understand money management and the value of a dollar - consider Monopoly, The Allowance Game and The Game of Life. Take them shopping with you and point out prices of items and special sales. It's okay to tell your kids if you can't afford certain things and it's the perfect opportunity to teach them about saving and budgeting.
Pre-teens and teens can make a real household budget with you for one month. There are tons of free templates online to use. Fill-out the worksheet with your income and all of your fixed expenses (insurance, car payments, property taxes, etc.) and have kids look at your disposable income to determine what will be needed to cover groceries, clothing, entertainment, subscriptions and the like. Once everything is divvied up, check in with your children daily to see how the budget is looking. If they want to do a family activity and there's no money left in entertainment, have them decide where they will take the money from and if it's even possible to do the activity that month. Sit back and watch the brain connections happen!
Foster Financial Independence
Take your tween/pre-teen child to the bank and open a savings account in his or her own name. Many banks offer a youth savings account with no fees and provide kids with their very own bank card. My children love using the bank machine to deposit cheques and print receipts out, and they can also visit the teller to make transactions and go online to watch their account grow (or shrink!)
Encourage kids to be industrious by helping them to set-up a lemonade stand or car wash, but take it a little further by telling them they must pay you for the supplies they use (cups, drinks, soap, etc.) with their earnings. This is a great way to teach them the true value of work and the meaning of a business agreement. Encourage older kids and teens to look for work and other means of generating income outside the home such as babysitting, dog walking, snow shovelling, and more. Kids get a great feeling of accomplishment by taking on a project or part-time job and making some extra cash.
Establish a habit for saving and giving money from an early age. Whether children receive an allowance or not, set up three jars labelled spend, save and give. Have kids choose a percentage of money they receive from allowances, gifts and special chores to go into each jar and at the end of an agreed upon time, let them decide on where to donate the money from their "give" jars, perhaps to a local animal shelter or environmental initiative? Charitable children have the added bonus of learning that there are more important things than material possessions, and that giving really does feel as nice as receiving.