Apr 7, 2022
The sooner your kids start learning basic financial concepts, the better prepared they’ll be when their first paychecks begin rolling in.
But with cashless transactions on the rise, teaching them the value of a dollar and the importance of saving isn’t as simple as it once was.
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Here are a few tips on how to help your kids make the transition from piggy bank to plastic as they grow.
1. Get them started with a clear piggy bank
When your kids are young, the easiest way to help them understand money is to give them a cash allowance for completing basic chores, like making their bed or cleaning their room.
Your child’s first allowance is also a great opportunity to introduce the idea of saving. Deposit their earnings into a clear jar or piggy bank so they can watch their money grow over time.
Using a clear bank is important, because it will also help your kids visualize how much their savings deplete whenever they spend their allowance.
Once they’ve saved up enough to buy something they want, have them count out the total cost from their bank and let them hand the money over to the cashier when it comes time to pay.
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2. Teach them about interest—the hard way
When your kids are a bit older, you can introduce debit, credit and interest.
Interest might be complicated for your kids to understand, since it’s a not-so-good thing for those who borrow, and a good thing for those who save.
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If your child has something that they’re saving up for, you can offer to lend them money to achieve their goal faster, with the catch that they’ll be on the hook for interest if they don’t pay you back by an agreed-upon date.
On the flip side, you can use your child’s allowance to show them the power of savings interest. At the end of each month, sit them down and count up their savings. For every dollar they’ve saved, give them a penny or a nickel in interest.
3. Open up a kid-friendly bank account
Once your kids have been earning an allowance for a few years and have a solid understanding of the basics, it’s time to give them the responsibility of their own bank account.
After opening a new account for your child, it’s important to sit down with them every month to discuss how it’s going — how much they’ve spent, how much they’ve saved, and how much they’ve earned in interest.
If they’re prone to dropping too much at certain stores, some starter accounts will let you put restrictions on where your child is able to use their card.
You can also put a spending cap on your child’s account when they’re first starting out and then increase their limit over time. There are a number of account options available for first-time bankers, but you’ll likely want to find one that allows you to help your kids manage their money for the first few years.
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Shane is a reporter for Moneywise. He holds a bachelor’s degree in English Language & Literature from Western University and is a graduate of the Algonquin College Scriptwriting program.
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