Money in the piggy: Tips for teaching children about money at home

Personal finance is not typically part of the curriculum in schools. Rather, the school of life teaches us how to overcome financial challenges. Learn the fundamentals for teaching your kids about money.

Since financial and economic education are not typically offered in school curriculums, the responsibility to provide education to your children on those subjects at home becomes very important. Each parent has a role to play in order to transmit their financial values and lead by example to teach the basics of finance to children, beginning at a young age.

Several concepts are important to teach, but some parents either may not feel the need, may not see the importance, or may not have all the knowledge to address all financial topics that exist. To make it simpler, here are four fundamentals to pass on to your children about managing their money: Save, Spend, Share and Invest. Teaching these fundamentals is easy…it starts with a piggybank.

When your child is as young as five or six years old, you can begin by offering them a piggybank. This gesture will initiate your child’s reflections on the usefulness of this object. Whatever your structure in your home may be, you can encourage your child to save any money they come into contact with, whether it be through chores, allowance, gifts, etc. By teaching your child how to use a piggybank, they will learn the general idea of creating savings at a very young age. Once your child begins to understand basic savings, you can move forward with this education by providing your child with multiple piggy banks. You can now teach the principle of management of funds by dedicating each piggy bank to a unique purpose.

Save

The first piggybank can be used for long-term savings, such as education or a major purchase, such as a bike. When the child is older and/or a minimum dollar amount has been collected, this money can then be rolled into a youth bank account. These accounts will likely not offer much in the way of interest on any money deposited, but will teach your child about how personal banking works and help introduce the concept of a financial safety net for “just in case” situations.

Spend

A second piggybank could serve to save money for short-term expenses that the child is interested in spending their money on, such as a toy or game. This will teach your child the importance of saving money for “special” items and understanding the value of delayed gratification. Once they become used to the idea that they need to save money first for the things they want, they will be less likely to turn to credit later in life. This is also a great opportunity to teach your child about the difference between wants and needs.

Share

The third piggybank can be used to save money for birthday gifts for friends and charitable contributions. The concept of responsible giving is an important value to instill early in life and also fosters a sense of community. This is a great opportunity to also teach children about donating their time, as well as their dollars.

Invest

This piggybank can be used to raise funds for investment purposes, such as stocks. Investing a small amount on behalf of your child in a stock they might be interested in, like a gaming company or ice cream producer, can teach them about returns, dividends, and learning when to buy or sell. It can also be a good way to introduce the concept of ethical investing.

By creating these four piggy banks, these four important concepts will be demonstrated and reiterated on a small scale throughout childhood. It is important to note that the ages at which you introduce your child to these concepts will vary based on their level of understanding. This approach will teach children how to make financial choices and prioritize according to their goals and aspirations. They will learn that they cannot put all their money into one “basket” and hope to be able to do everything they wish for at the same time. This education will teach children the value of money in a fun and interactive way, while teaching principles that they will apply to future decisions such as what to do with their first pay cheque.

Keep the conversation going

How did you receive your financial education at home?  Post a comment below.

Disclaimer

The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.

About the Author

Karine Arsenault-Pelletier, CPA, CMA

Karine, financial controller at Cresswell Industries, is an area leader for CPA Canada’s Financial Literacy program and a volunteer for several organizations in Haiti.