How to Teach Your Kids Good Money Habits | Mydoh

How to Teach Your Kids Good Money Habits

Talking about money is the key to teaching kids good money habits, at every age. Those conversations don’t have to be awkward — and they can even be fun.
By Amanda Lee · March 17, 2021 · 7 minutes read
A mom teaching her daughter good money habits

‍Why is teaching kids good money habits important?

For many parents, that question is scarier than any inquiry about the birds and the bees. In a 2019 survey, 25 per cent of parents were either very or extremely reluctant to talk about financial topics with their kids, and another 25 per cent classified themselves as “somewhat reluctant.” 

We feel squeamish talking about money for a number of reasons. We don’t want our kids to worry about money, or we think they may tell the neighbours how much we make. We feel that we don’t know enough about money or personal finance to teach our kids about it, or we’re worried we’re not good role models when it comes to spending and saving — and that our kids will find out about, or, worse, emulate our less-than-ideal money habits.

But if we want our kids to develop good money habits, parents need to get comfortable with talking to them about things like spending, saving, debt, and investing. If we don’t talk about money, we’re sending the message to our kids that money is something mysterious, shameful, or even scary. And it’s hard to form good money habits with those beliefs.

Having honest conversations about money is even more important when you consider that Canadians today are carrying record amounts of debt. In fact, according to Credit Canada, the average Canadian household debt has increased four times in 30 years: we now owe $1.77 for every dollar earned. So, we owe it to our kids (pun intended) to help them develop smart money habits and set them up for a healthy financial future. 

A father teaching his daughter how to save money using coins from a coin jar

Teaching kids about good money habits starts at home 

We’re not suggesting that parents have to break out tax returns and pay stubs in order to talk about household finances. In fact, telling your five-year-old how much you earn could be counterproductive; most elementary school kids won’t get the difference between $1,000 and $100,000.

Instead, start with what’s most familiar to kids: their home. Take a little tour of the house and talk about what it costs to keep it running. You can show your kids the monthly bills for electricity, water, heat, property taxes, and home insurance, and they can tally up the amounts. Discuss rent or mortgage payments and let them know how much it costs — literally — to keep a roof over their heads. You can also talk about how much you spend on groceries, gas, and insurance for the car, as well as expenses like medications and clothing. Another important lesson is talking about saving for retirement or post-secondary education

These conversations are tangible ways to help kids learn the difference between wants and needs. When they know the real costs of living, it’s easier for kids to understand why you don’t order pizza every evening or why there’s no money in the budget to buy that $200 pair of sneakers. 

And when kids have a sense of just how much cash goes to running a household every month, then how much you earn begins to make more sense. Younger kids begin to understand that it costs a certain amount of money each month to live. For teens who are contemplating their first job or starting their career and entering the workforce, information on how much you earn and how much it costs to run a household can help them make informed choices and entrench good money habits early.

Talk to your kids about good and bad money habits

One of the easiest ways to teach kids how to develop good money habits is to give them an allowance, and then use it as a teaching tool. 

With little kids, the classic “three jar” system works well: they can divide their weekly allowance into three containers marked “spend,” “save,” and “give.” This gets kids used to the idea that some of their cash is meant to be spent now, some saved for later, and some used to make the world a better place for others. Let your child pick the charity for their “give” jar — maybe an animal shelter if they’re crazy about dogs, or a charity to honour a loved one who’s been ill, or a relief fund for people affected by COVID-19. They’ll be more excited about giving back if the cause is one they care about.

As kids get older, you can up their allowance, along with their financial responsibility. This could mean gradually making your kids responsible for more and more of their own financial decisions, like buying their own clothing beyond the basics, video games, or trips to the coffee shop. Once they’re old enough, encourage your teen to get a part-time summer job to pay for these extras and save for their future. 

What if your kid spends all their money on a coveted hoodie and has nothing left to go out with friends? Instead of bailing them out, gently point out they’ve learned a valuable lesson in budgeting. The Mydoh money app lets both of you track kids’ spending, while empowering them to make choices about purchases without going into overdraft. In a pinch, the app’s Lock Card feature is a good way to pause their spending while you have a money talk with your kid.

Learn more about how Mydoh’s money app for parents and kids works.

Discuss your own money habits

What if you’re carrying a credit card balance? Maybe you haven’t yet taken advantage of your employer’s matching-funds offer for your RRSP (Registered Retirement Savings Plan). Or maybe you’ve done a little too much online retail therapy to combat pandemic boredom.

While your initial reaction might be to feel shame, these situations are opportunities to teach your kids powerful lessons about good and bad money habits. Better still, they’re a chance to model accountability and make changes in your own financial habits.

Speaking of accountability, consider showing your kids your credit card statement. Granted, you may have to take a deep breath first, especially if your credit card debt has gotten out of hand. You and your kids can then brainstorm ways to change your spending habits and pay off the balance. For example, have your kids help you identify the “wants” versus “needs” on the bill and make a plan to stick only to the needs. Find other sources of cash, like selling unused items on Kijiji or Facebook Marketplace, to help pay down the debt. You can explore other financial options with older kids— like using a line of credit that offers lower interest rates. Make a thermometer chart to track your progress and have a celebration when the debt is gone. 

Teaching kids good money habits with games

The strategies mentioned above for paying down credit cards are an example of “gamification” — using the same properties that make games so addictive and applying them to other areas of life. Like (cough) developing smarter money habits.

Games are a great way to teach kids about money and to motivate them to develop healthy money habits. Online, you can find lots of printable worksheets and money games that teach kids basic money concepts in fun ways. 

3 board games to teach kids better money habits:

  • Little kids might love Lemonade Shake Up!, which introduces number recognition as well as the concepts of saving and working for money. 
  • The Allowance Game teaches kids from first grade and up how to handle money and make change for larger bills. 
  • Old standbys like Monopoly and Monopoly Junior teach currency recognition, addition and subtraction, as well as debt and the opportunity costs. When you buy Park Place, you may not have enough money for Boardwalk.

The importance of encouraging financial responsibility in children

Talking about money has tangible, immediate benefits. A 2015 survey by the Organization for Economic Cooperation and Development (OECD) found that a 15-year-old who talked about money with their parents scored higher on financial literacy.  

The lesson here is whatever you do, keep talking to your kids about finances. Being able to have honest conversations about our financial goals, beliefs, doubts, setbacks, and triumphs is one of the best ways to cultivate healthy behaviours and attitudes toward money.

Find out how Mydoh can help give your kids a real-world experience of earning and spending their own money today

Download Mydoh today to learn more.

Get Mydoh's Newsletter

This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.

May 30, 2022
Smartphones and social media keep kids and teens connected, but at the cost of their online privacy. Here’s what you need to know about keeping your family safe.
April 11, 2022
Men and women have equal rights, but not when it comes to wages. Here is what kids and teens need to know about the gender pay gap in Canada.
April 7, 2022
Did you know that the average tuition costs for Canadian undergrad students are currently around $6,700 per year? Learn more about the best way to save for your child's education in Canada.
April 1, 2022
One of the best ways kids can learn financial literacy is to put their knowledge into practice by earning their own money through chores and household tasks.
March 9, 2022
Online games and board games are a great way to introduce financial literacy skills. Here are thirteen fun money games for kids to play.
March 8, 2022
When should parents start teaching kids about money? The answer may surprise you.
February 22, 2022
Despite Canada’s diversity, Black people typically earn less money. Here is what kids and teens need to know about the racial wage gap in Canada.
January 4, 2022
Students are returning to online school in some provinces due to COVID-19. Here’s how parents can support remote learning for kids and teens.
September 21, 2021
Understanding the difference between a need and a want is fundamental to building good money habits with teens. Here are some tips on teaching the difference.
May 26, 2021
We share some tips for newcomers on understanding the financial landscape in Canada and how Mydoh can help kids learn about money.

Seriously Secure

Kids can spend in-store and online up to allowable limits with their Mydoh Smart Cash Card issued by Royal Bank of Canada and powered by Visa.

Terms & Conditions

*The 30-day free trial offer is activated on the date of completion of the Mydoh mobile app account registration process. After your free trial offer ends, a monthly subscription fee of $4.99 ($2.99 for RBC Clients) will be taken out of your Mydoh Wallet. You can cancel any time by contacting Mydoh. Mydoh reserves the right to cancel, modify or withdraw this offer at any time.

† The RBC Visa Prepaid Mydoh Smart Cash Card (“Mydoh Smart Cash Card”) is available as a physical and digital card that can be used to pay for purchases online or in-store anywhere Visa contactless (tap) is accepted.

 

1. The RBC Visa Prepaid Mydoh Smart Cash Card (“Mydoh Smart Cash Card”) is available as a physical and digital card that can be used to pay for purchases online or in-store anywhere Visa contactless (tap) is accepted.

2. Parents can load and kids can access up to a maximum of $500 per day on their Mydoh Smart Cash Card. When loading money to a Mydoh Smart Cash Card, there are limits to the number of transfers and dollar amounts. Please see transfer and transaction limits.

3. RBC Client means an individual who holds at least one personal deposit account with Royal Bank of Canada (excluding saving accounts and US dollar accounts), or a personal RBC Royal Bank Credit Card.