Financial Recovery Articles
Teach your kids to be smart savers
BDO Dunwoody Limited
December 2004, City Parent
“It took me two years, but I finally saved enough to buy it!”
These are the words of a 10-year-old proudly announcing his new purchase of a bike. Ben’s parents have been teaching him about the value of money – and how to save for his dreams. When he achieved his first goal, he was bursting with pride and accomplishment.
Many parents spend time teaching their children how to play baseball, or how to swim or how to stay safe. But if we want our children to be financially responsible adults, equipped to set goals, manage their money and achieve their dreams – then we must also teach them how to be smart savers.
Here’s how you can start.
- Teach your children sound financial values that will help them to become adults who can manage their finances capably and confidently. Focus on honesty, self-discipline, responsibility and sharing.
- Allow your children to make their own decisions and mistakes. Give them an allowance, provide them with some guidance regarding spending and saving, then leave them to work it out. The allowance should cover enough for regular expenses like school lunches and birthday gifts for friends, as well as for some discretionary spending, like the occasional treat. Discuss the different ways of spending and saving the money. If your children spend all of their allowance on treats and don’t have enough left to buy pizza at school, don’t bail them out. They need to learn that their decisions have consequences – both good and bad.
- Treat children as respected participants in the family’s finances. Discuss how Mom and Dad work for the money they bring home and what they buy with that money. Address what the children are expected to buy with their allowance. When you write a cheque for a school trip, explain the concept of the money behind it. Involve everyone in decisions regarding major family purchases: “do we buy a new TV now or do we save our money to rent a cottage next summer?”
- Discuss the differences between wants and needs. Provide opportunities, such as washing the car or raking leaves, which will enable them to save more money. Offer incentives such as, “If you save half the cost of the ticket, we’ll give you the other half.” This provides extra motivation and encourages children to investigate the value of what they want.
- Help your children set and achieve age-appropriate goals. An eight-year-old won’t understand the concept of saving for university, but can learn to save for a video game. Help them set up a bank account and explain how interest works and how savings grow over time.
- Start discussing money with your children as soon as they express a desire to buy something. For example, when we set off on our first two-week family vacation, rather than responding to repeated requests of “please buy me this,” we gave our four-year-old and six-year-old $20 each and told them it had to last them for the entire trip. This initiated a new learning experience: when the children saw something they might like to buy, we’d discuss what the item cost and how much money they would have left if they bought it. They quickly learned the value of $20!
By teaching your children to be smart savers, they will be able to experience the joy of travelling on their dream vacation, paid for with their own money. The pride of buying their first home with their own down payment. And the confidence of a secure financial future. What better gift can you give them?
Joyce Brown, BHSc, is a counsellor with BDO Dunwoody Limited (www.debtworries.ca), which has been helping individuals solve their debt problems for over 40 years. You can reach Joyce at (905) 524-1008 or jbrown@bdo.ca.
This material is general in nature and should not be relied upon to replace the requirement for specific professional advice.
