Kids and money sense

Stress the need to sock it away
WHAT TO DO: Most financial experts agree that saving 10 per cent of our income is a good idea, and this goes for kids, too. Give your child a piggy bank and take her to the bank periodically to make a deposit. Having a bank passbook will help her see the money grow, and you can explain the magic of interest. You can also encourage your kids to save a portion of any money they receive as gifts or from doing extra chores.
To motivate your kids to save, increase their allowance only when they have proven they can stick to their savings goal. As an added incentive, reward them if they save a certain amount. For example, you could chip in $1 or $2 for every $5 or $10 saved.

TIP: Talk to your kids about what they are saving for and encourage them along the way. By their early teens, kids are ready to create much longer-term goals, such as saving for an end-of-school-year trip.

THE PAYOFF: Having the discipline to save and live within one's means are great life and financial skills. Once your kids acquire these skills, they'll become more independent and self-reliant.

Teach them how to budget
WHAT TO DO: Use everyday exercises to help instill budgeting basics. Your six-year-old can help you find the best price on ice cream at the grocery store. Your nine-year-old can carry around a calculator to help you add up purchases, while your 13-year-old can plan her budget for an upcoming summer trip and open and keep track of a chequing account.

TIP: Kids need to understand that there simply isn't an unlimited supply of funds to spend, so as they mature, share details of your family's budget with them. Explain how you set aside money for savings, pay the bills and use what's leftover for spending. Talk about how you only have so much disposable income and that if you buy pizza every Friday night, you won't have enough left over to go to the movies together. “Never be afraid to tell your kids ‘we can't afford it,'” adds Godfrey.

THE PAYOFF: Kids learn the difference between needs and wants when you model good budgeting practices and teach them to comparison shop.

Encourage your kids to earn extra income
WHAT TO DO: While the experts say it's not a good idea to tie allowance to regular household chores, you can create “extra-credit” jobs to give your kids a chance to earn more money. Let them clean out the van and pay them for the time they spend on the task. As kids get older there are lots of ways for them to earn extra cash: babysitting, garage sales, cutting grass for the neighbours, etc.

TIP: Help your child turn a passion into a business venture. If your daughter loves dogs, she could start a dog-walking service; if your son collects trading cards, he might want to sell some on EBay.

THE PAY OFF: “Connecting work with earning money is valuable in developing responsible work habits and acquiring discipline,” says Godfrey. “Those who start early have an easier time mastering these skills than kids who aren't required to work until after high school or university.”