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Canada’s Peter Pig’s Money Counter

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Five ways to encourage saving and spending habits in your children

Five ways to encourage saving and spending habits in your children

By, Carla Hindman, Director of Financial Education, Visa Canada

How often do you discuss money with your children? If your answer is "not often," you're not alone. Educating your children about strong spending and saving habits at an early age can have a concrete impact on their financial futures for the better.

Here are five ways you can encourage your children to develop good saving and spending habits.

Find a balanced allowance. One popular model for weekly allowance is to give your children $1 for each year of their age, meaning your eight-year-old would get an allowance of $8 a week. Of course, one size does not fit all, and you can adjust this allowance to fit your family budget, rules and values. Consider using a needs-based allowance worksheet to help both of you determine how much your child needs, and who will be expected to pay for what.

Reward them for saving. Back-to-school shopping presents a great opportunity to teach your children how to differentiate wants from needs. Set a firm school-shopping budget, and make a list with your children of what they need for school. Review which items are necessary versus which items are optional. Once needs are determined, help them calculate how much is left in the budget to spend on extras. Consider rewarding your children by giving them the surplus money to spend as they choose. If you have a teenager who's hoping to drive a new car soon, consider matching his or her savings. Click here for more tips on back-to-school saving.

Open their first bank account. Middle school is a good time to replace that savings jar with a savings account, and if your children have been saving cash for years, it can be very rewarding to take that money to the bank or credit union and open their first account with it. This is a great way to introduce them to the concept of interest, and how savings accumulate over time when left unspent.

Help them earn their own money. Earning income through hard work is one of the best ways to learn the true value of money. Depending on their age, encourage your children to earn money, whether it's through setting up their own lemonade stand, doing chores around the house or neighborhood, or getting a part-time or summer job. This helps your children supplement their allowance and teaches them the real-life value of working.

Talk to your teen about essential expenses. As your children enter high school, you may want to consider delving into more complex financial concepts with them. If your teen has a job, review their paycheque with them and explain where the money goes and why – for example, if money is withheld for tax purposes. Or talk to them about upcoming larger expenses, whether it's a car or post-secondary education tuition, and discuss all the financial pros and cons of these investments.

Bottom line: Learning early how to save and spend wisely is crucial to good money management, and teaches other important values. The best way to help your children build solid financial skills is through practical, age-appropriate lessons, which are relevant as they grow into young adults.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.

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