Fall Finances

A new school year can be a great time to teach your kids about money. Here’s how to help them shop for supplies and spend their allowance wisely.

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They’re the age-old questions for families: Should kids get an allowance and how do you decide how much to give? While each family needs to decide what works best for them, here is some advice and common rules-of-thumb to help you.

Should children get an allowance?

If you decide to give an allowance, an emerging practice is to not tie it to chores. Contrary to the prevailing understanding that money paid for work done is the best way to teach children about the relationship between working and earning an income, many family experts are now advising parents to scrap this way of thinking. Running the household should be a family affair, they say, with everyone pitching in without expectation of payment.

Sometimes that’s easier said than done, and many parents still find the promise of money the surest way to get their children to make the bed and do the dishes.

Still other parents choose not to give an allowance at all, and simply provide a reasonable amount of money on an as-needed basis.

At what age should my children start getting an allowance?

Having some pocket change teaches children about the value of money, the consequences of overspending, and the importance of budgeting. Even very young children can start learning how to delay their gratification (I want some candy today) for a future reward (I want a toy that I’ll have to save up for).

Kids below a certain age don’t yet understand that money is valuable… Consider delaying an allowance until you see that your child understands this concept.

However, kids below a certain age don’t yet understand that money is valuable and that it can be exchanged for things they want. Consider delaying an allowance until you see that your child understands this concept. For example, do they misplace, lose, or give little thought to money? When offered the choice between a toonie and a $20 bill, do they choose the toonie because it’s shiny and more interesting than paper money? These are signs that your youngster isn’t ready for an allowance.

How much should I give and how often?

A common rule-of-thumb is to give each child 50 cents to $1 for every year of their age. This means that a 10-year-old would get $5 to $10. Many families dole out allowances weekly, but you could also choose to do them on a monthly basis. It’s important to stay consistent, so whatever you decide, make sure that, above all, it fits into your family’s budget.

Remember that a strong financial plan isn’t just about your investments. It starts with a strong foundation of day-to-day spending and saving.

We asked some Canadian families about their approach to allowance. Here’s what they had to say.

“We don’t do allowances. It’s too hard to stay consistent, so we just give the kids money when they want to buy a Slurpee or go to a movie with their friends.” – Jillian, mother of two children aged 12 and 14

“Rachel gets a 75-cent raise every year on her birthday. She currently gets $3 a week. My only rule is that one-third goes to savings, one-third goes to a donation, and one-third becomes her pocket money.” – Leanne, mother of Rachel, age 7

“We give a flat rate of $1 for each year. The 15-year-old is now getting $15 a week. It’s not related to their chores, but we will give a ‘bonus’ for bigger projects like helping me stain the deck.” – Andy, father of four children, aged 15, 13, 10 and 9

Budgeting basics now taught in schools

Generations of children have been lacking in financial literacy. Now schools are introducing updated curriculums to reverse that trend.

In annual surveys where Canadians have been asked about their level of confidence in their personal financial knowledge, the results have not been high. That’s because, until recently, there was little to no financial education taught in schools. The Canadian Foundation for Economic Education (CFEE) has stepped in to help combat the problem by providing fun and accessible resources that teachers can incorporate into their curriculum for Grades 4 through 10.

CFEE provides a book called Money and Youth: A Guide to Financial Literacy free of charge to help teach students about the concepts of earning, spending, borrowing, saving and investing money. Also available as an eBook, it delves into big-picture concepts like entrepreneurialism, inflation, the stock market and the global economy.

Gary Rabbior, the head of CFEE said, “We hope to help young people be better able to undertake their economic roles, responsibilities, and decisions with confidence and competence.”

Pick up a copy of Money and Youth during your back-to-school shopping by visiting www.cfee.org, and use this time as an opportunity to talk about money with your children.

Lessons in back-to-school shopping

Every September, parents and children engage in the tradition of negotiating for back-to-school clothes and supplies. Little do they know they are practicing some fundamental skills of financial literacy.

In schools, more and more teachers are introducing financial concepts into their curriculums, but the fact remains that children are most likely to learn about money management at home. The annual back-to-school stocking up of paper and pencils, sneakers and jeans, and calculators and flash drives is an ideal opportunity to teach your children about the principles of money.

Children of all ages can get involved and help make spending decisions on their own school supplies. The experience can help them learn about budgeting basics, as well as how to manage their own money.

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