How to Teach Children Financial Literacy

In 2020, financial literacy was first introduced into the Ontario high school curriculum – a good first step many say, but more financial management needs to be taught to our youth.

The Ontario Government has recently announced that starting in the fall of 2025, Ontario high school students will be required to pass a financial literacy test to graduate. In order to pass students must demonstrate that they know how to create and manage a household budget, save for a home or an asset, and protect themselves from financial fraud.

Research has shown that people who are financially literate are less vulnerable to financial fraud. Plus, a strong foundation in financial literacy leads to more success in reaching life goals like saving for post-secondary education or retirement and managing debt responsibly.

Equipping our children with the tools and teachings to become financially literate helps empower them to feel confident in their financial decision-making down the road. Here ideas for teaching your child about money at different stages in their life.

For Young Children (Under 10)

1. Use a Clear Jar for Savings: Many parents buy their children their first piggy bank, and although we are moving towards a more cashless society, it is still a tradition in many households. Consider purchasing your child a clear piggy bank or one that has a viewing window in it so that they can watch their savings accumulate.
2. Introduce Simple Budgeting: During your next trip to the dollar store, consider giving your child $10. Help them understand the concept of budgeting by dividing their money into categories: spending, saving, and sharing. Maybe they spend $4 on candy for themselves (spending), keep $4 for a more expensive toy they would like to purchase later (saving) and use $2 on candy for a friend at school (sharing).
3. Play Games that Use Money: Board games like Monopoly or PayDay are a fun way to help teach money management and strategy. During the game, you can point out moments where saving or spending decisions affect your game play.

For Tweens (10 to 12)  

1. Open their First Savings Account: Take a trip to the bank and help your child open their first bank account. Maybe consider giving them $50 or $100 to mark the occasion and show them how putting the money into their bank account pays them interest whereas a piggy bank does not.
2. Give Them an Allowance: Ask your children to perform some basic chores around the house in exchange for a regular allowance. While it is important for parents to teach their children responsibility and helpfulness around the home without the expectation of payment for their work – at a certain point, providing them with an allowance gives them a sense of ownership and responsibility for their finances.
3. Discuss Needs vs Wants: Explain to children the difference between needs and wants. Needs are essential items like food, clothing, and shelter, and wants encompass everything else that would be nice to have but is not essential for survival. When you visit the mall next, explain why buying one new jacket might be a need, but buying a second one in a different colour is a want.

For Teens (13 to 18)

1. Encourage Them to Get a Part-Time Job: Babysitting, mowing neighbours’ lawns, working at the grocery store, gas station, or local drive-thru are all great jobs for teens as they join the working world for the first time. Having a job helps them understand the hard work that goes into earning money and shows them the value of managing of their income responsibly.
2. Show Them How to Use Budgeting Tools: Many banks offer budgeting tools or apps when you open a bank account. Show your child how to use budget apps or spreadsheets to track their income and expenses.
3. Teach Them How to Plan for a Major Expense: Teaching your kids about the importance of planning is essential. Sometimes it is important to save and sometimes we might decide to spend. Before they decide to make a major purchase like a new game console, cell phone, or a car to ensure they know how to plan ahead, including how to set monthly savings goals and estimate costs for the purchase.

The Best Advice for Last

1. Start Early: The best advice I can offer for teaching children financial literacy is to begin early! Not tomorrow, not next month or next year. It is never too soon to begin equipping your kids with the tools to be financially literate.
2. Lead by Example: Teaching children about money in the home is important, but you could be undoing all of your hard work if you are not leading by example. Make sure to demonstrate responsible financial habits such as budgeting, saving for the future, and avoiding impulse purchases. Kids learn by observing and they emulate what they see, so put your best foot forward as well!