How to talk to your kids about money

So what's the best way to broach the subject? To get some insight, we spoke with Annie Savard, Associate Professor of Education at McGill. Savard told us that on any given day, there are countless opportunities to teach your children about money. But not all parents are comfortable or equipped to do so.

Getting an early start

It's never too early to start giving your kids a financial education. "Studies show that by age 3, kids understand that you need money to buy things," explained Savard. "You don't need to go into detail. Just explain that food, clothing and toys aren't free—you have to pay for them! When you go grocery shopping with your preschooler, you can comparison shop and decide to roast a chicken for dinner because it's on sale. There are so many everyday opportunities to give them a financial foundation."

Where does money come from?

As the old adage goes, money doesn't grow on trees! So where does it come from? "Some young children think that ATMs are an unlimited source of free money. Others imagine that a caisse account is like a Harry Potter’s vault. They don't understand that money circulates and earns interest," said Savard. "A great way to teach your kids about saving is to sign them up for the School Caisse. If they get a birthday cheque from their grandparents, they can deposit it! In a world where money is becoming more and more abstract, where you can buy things online or with your cell phone, depositing money at the caisse is a tangible way for them to learn how to save." And it's a good idea to show them their statement so they can see their deposits, withdrawals and interest.

Needs vs. wants

One of the biggest steps toward financial empowerment is understanding the difference between needs and wants. "You have to tell your kids that some expenses are essential," added Savard. "These are their needs—like housing, food and clothing. If there's any money left over, you can buy things you want—like a game or movie tickets." There's a fine line between wants and needs. You need to eat, but you might just want to eat ice cream. Once your kids understand this, you can teach them about delayed gratification and show them how to save up for a big-ticket item. "Does your daughter want an expensive gaming system? Make a budget with her and come up with a regular savings plan. She'll see that saving needs time and effort. Plus, a kid who learns to wait for what they want is less likely to overspend as an adult."

Learn to make choices

Let your kids decide how to spend their money. "Are you going to the zoo this weekend? Give them a bit of cash that they can spend however they want: on a souvenir or cotton candy, for example. If they don't spend all their money, they can hold on to the rest for something else or deposit it into their account." Savard reminded us that kids learn by example: "Are you planning your next vacation? Get your children involved in the planning. Compare prices online, explain why you're making certain choices and write up a vacation budget together. Not only will this financial decision-making empower your child financially, but you'll be raising a responsible consumer and citizen!"

Allowance or no allowance?

Experts agree that giving your kids an allowance is a great way to teach them how to manage money. But should you be paying them to do household chores? According to Savard, the jury’s out: "It's not always a great idea to pay your kids for housework. Then they'll expect to get paid for all their chores. But when you live together as a family, everyone needs to pitch in and do their part. It's not about money. Some parents go for a basic allowance and then they'll give their kids extra cash for special chores like raking leaves or shovelling snow."

There are endless opportunities to talk to your children about money. Check out these online games to introduce your children to the world of finance!