Financial literacy can be taught to children as young as three years old, if it’s done in an age-appropriate way, say experts (Getty Images/Monashee Frantz)
Learning a skill early in life helps create developmental building blocks. The same rule applies to financial literacy, experts say. Across Canada, provinces have begun introducing this educational life skill into school curriculums, with Alberta being the latest region to announce a new syllabus beginning this coming September.
“Money plays a big role in life,” says CPA David Trahair, a personal finance expert and author of CPA Canada’s free practical guide, Survive and thrive: Move ahead financially after losing your job. “The earlier you start developing your habits, the better.”
From the classroom to the kitchen table, here are a few ways to educate kids about money.
1. START THE CONVERSATION EARLY
Money can be a sensitive subject, making it awkward for some parents to talk to their kids about it, says Melissa From, CEO and president of Junior Achievement Southern Alberta. “It’s uncomfortable [yet] it’s so important,” she says.
Surprisingly, teaching children about finances can begin when they are young as three or four years old, according to Gary Rabbior, president of the Canadian Foundation for Economic Education, which runs the annual Talk With Our Kids About Money Day.
“Behaviour development is so much easier than behaviour modification,” he says. “When they’re young, it’s so much easier to work with them. By the time kids get to high school, many of their behaviours have become entrenched.”
CPA Michael Massoud, financial literacy principal at CPA Canada and father of a three- and seven-year-old suggests parents use real life “teachable” moments to kickstart lessons in financial education.
“Giving children those opportunities to be comfortable with money is step one,” he says. “When I’m at the cash register, I like to get my kids to count out the money we owe and hand it to the cashier and count the change we get back. I remind them to always get the receipt in case we need to return the item to the store”.
While COVID-19 may change some daily interaction, parents can still teach these lessons when making online purchases, he adds. “For example, when shopping online with my son, I try to help him develop savings habits early on by showing him how to use apps such as Honey and Rakuten,” says Massoud.
2. MAKE IT RELATABLE
For a lesson to be effective, it also has to be age appropriate, says From, whose organization is helping develop Alberta’s financial literacy curriculum for kindergarten through grade 6.
“Children as young as kindergarten are certainly equipped to understand some of those really basic concepts, as long as it’s done appropriately,” she says. Like Massoud, From suggests activities such as discussing transactions when they occur in-store or while ordering items online. “For high schoolers, this teaching may be preparing a budget and learning economic theories,” she adds.
As a father of seven- and nine-year-old children, CPA Eitan Dehtiar, a business consultant, knows kids learn lessons most effectively through personal experience. When his children play video games, he gives them a certain amount of money to start, with no top-up when they run out.
“The kids enjoy that kind of thing—they don’t realize they’re actually learning,” he says.
Massoud agrees with this approach, adding that games and stories themselves can become the lessons. “Those are the magical kind of moments of learning that give insight to the topic and help children remember a lot more,” he says.
3. TEACH THE LONG GAME
Learning to be money smart is a lifelong lesson. And experts say goal-setting and delayed gratification is a large part of becoming financially literate.
This includes letting children make mistakes. Rabbior says it’s better for them to regret choosing the wrong $5 toy with allowance money—a lesson most kids will remember—than buying the wrong car when they’re older.
“The most important thing that I think we can teach our kids is a sense of self-sufficiency, meaning that they believe they can set a goal and achieve it,” says Rabbior.
“And that is the crux of financial literacy education. Because, later on, they will set their financial goals, map out a path to get there, budget money, make trade-offs, set aside savings and do things that give them the confidence that they can achieve their goals.”
CREATING POSITIVE OUTCOMES
By being actively involved in educating your kids about money from an early age, you’ll not only complement the training they get at school, but you’ll also help them move into early adulthood with a better understanding of how to manage their personal finances and avoid a lifetime of debt. (This is an important skill; as Trahair points out, 45 per cent of the Canadian population cannot pay off their high-interest credit card debt.)
“As parents, we want to raise our kids to be happy, healthy and financially successful,” says Massoud. “Parents have the biggest responsibility and stake in building the financial foundation of their children.”
And early intervention has proven effective.
“We know that when young people have access to this information and are given financial literacy education, they will have fewer instances of debt, they will have more instances of financial success … there will be less need to rely on social services and economic support,” says From. “Those are all the things that we want for our society, but also the things as parents that we want for our children.”
CONTINUING THE CONVERSATION
For more reading, check out CPA Canada’s A Parent’s Guide to Raising Money Smart Kids. CPA Canada has also compiled resources to help you and your family talk about money and finances, including budgeting tools, teaching kids about setting SMART goals and more.