As a way to teach children good money habits, a lot of parents and grandparents are giving children financial gifts this holiday season, like a piggy bank filled with shiny coins or a contribution towards their RESP. Linda Mackay, senior vice president of retail savings and investing at TD, says this can be a great idea, provided you make the lessons appropriate to a child’s age.
“While older children can start to grasp more complex ideas such as budgeting and setting spending priorities, younger children should be taught about simpler things like the value of a dollar, and how that dollar can add up through saving, ultimately allowing them to pay for something they really want,” said Mackay. “Giving a financial gift, like cash to kick start their first savings account, can open up a new opportunity to teach children something about money management, whatever age they are.”
A TD survey found that 90 per cent of parents think it’s important to start talking to children about finance before they reach their mid-teens, with almost 40 per cent who think the conversation should begin before their children are 10 years old. Mackay offers age-specific tips on how a holiday gift of a financial product can be used to encourage good financial habits in a child:
Under 6 years old: Keep it really simple. Give a child some shiny coins they can put in a jar or piggy bank to watch their savings grow. Make the experience of adding to the piggy bank a big deal – have some fun. As the number of coins increases, you can swap them occasionally for the equivalent amount in crisp bills, helping them understand the value of different denominations of coins and notes and develop a sense of pride in their savings habit.
6 to 10 years old: Start introducing more complex ideas, such as how long it will take to buy something your child really wants. You can use a holiday gift of a first savings account, another financial gift, or even cash – to help them get closer to their goal. This is also a good age to help children open their first bank account so they can learn to make deposits, withdrawals and watch their funds grow. The importance of understanding money and saving can also be reinforced through things like a small allowance, perhaps earned through set chores.
11 to 15 years old: As a gift, a lot of parents and grandparents contribute to a child’s Registered Education Savings Plan. This offers the opportunity to talk to the child about how investments like an RESP work and why saving early for post-secondary education is a smart way to invest in their future. Your children might also be earning a little money through odd jobs or baby-sitting so it is a perfect time to talk about goals, budgeting and saving for something they’d really like, including university or college.