Hi there!

We have always firmly believed that money is a habit best developed as a child. Some concepts like Savings, spending smartly, and not borrowing for unnecessary things is best inculcated in our formative years.

For kids of ages 3 to 5

They've probably started collecting some decent pocket money from birthdays, holidays, or a small weekly allowance. This is when we can start to teach them the three basic things we can do with money: save it, spend it, and give it. You might set up three jars for them so they can more easily divide up their money into the save, spend, and give categories.

We’re not talking about a lot of money here, so as long as they’re putting something into each jar. Maybe the “spend” jar gets used to buy a candy bar in the grocery store or snacks for themselves. The “save” can be used for a special toy they want to splurge on. And the “give” money can be pulled out to give gifts to their parents/grandparents, buy something for your house help.

Introducing the idea of saving, spending, and giving money now, in its most basic form, will lay the foundation for how you talk to them about money in the years to come.

For kids of ages 6 to 10

By this age, kids are starting to develop a deeper understanding of how money works. They understand that grown-ups have jobs to make money and that much of what they see around them—their home, the car, their Friday night pizza dinner—is paid for with money. You can start to explain to them the difference between using cash, a debit card (cash that you keep at the bank and the bank then sends to the store), and a credit card (you borrowed that money and will have to pay it back to the bank later).

This is a good age to start letting them attempt to make their own simple purchases in a store. They’ll need your help with counting out the correct amount or with prompting when it’s the right time to hand over the money, but it’s good practice that will build their confidence about how the process works each time they do it.

If they don’t already have a bank account of their own, this is a great age to open one up. They may have some money they keep at home in their jars or piggy bank, but it’s also good for them to get accustomed to the idea of stashing some money away safely and watching it grow as they add to it over time. Take them to the actual bank to open the account (they will feel very grown up), and take them back, if you can, each time they want to make a deposit. (Actually depositing the money themselves really drives home the idea that they are adding to their own little pile of savings.)

For kids of ages 10 - 13

At this age, you should start talking to your kids about how you decide what you spend money on. “Being able to afford it” and “choosing to spend money on it” are two totally different things, and it’s at this age that kids can really start to grasp why you prioritize spending in one area over another. For their next birthday shopping trip, take them shopping with you and keep a fixed budget, let them decide if they want to buy that toy, or have a party.

This is also a good age to introduce the concept of long-term savings for bigger items. 

For kids of ages 13+

This is the perfect age to help them develop some different long-term savings goals, whether it be saving for a new gaming system, smartphone, computer, or even their first car. You should also be talking about what you can (or are willing) to pay for when it comes to college, so they’ll know what part they’ll need to plan for.

Eventually, our kids are going to graduate with debit cards and credit cards, but I’d suggest you keep them using cold, hard cash for as long as possible. They are more likely to develop good money habits if they feel that little bit of pain when they hand over all that hard cash for a pair of sneakers. You feel a purchase more when this type of exchange happens—I give you money, you give me shoes—and their wallet feels a bit slimmer afterward.

On the other hand, when you pay with a card—I give you a card, you give me shoes, and you give me the card back—the immediate impact isn’t felt, so the impulse purchases may soar.

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Teaching your children about money at any stage is going to take time on your part. But introducing them to money and imparting money management skills in these small ways mentioned above can go a long way in their future.

Kids will follow your lead. Remember kids are always observing adult behaviour and building their habits and worldview around your actions. Therefore, be slightly mindful about your relationship with money around your children so that you can set them up for financial wins and not woes.

Disclaimer: - The articles are for information purposes only. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. You must consult a financial advisor who understands your specific circumstances and situation before taking an investment decision.