how to teach kids about money

Money management isn’t always easy and teaching your kids can be just as difficult. We sometimes forget that our kids do have money from their allowance or from birthdays and they will need to make choices about what to do with that money. 

This podcast is all about teaching your children money management skills. It’s not a subject many of us are comfortable with. Mark Marshall, Licensed Insolvency Trustee with Allan Marshall & Associates helps us recognize teachable moments to build in money lessons appropriate for their age.

Mark also discusses:

  • The best way to get started and at what age
  • Tips to get them started saving
  • Letting your kids make poor spending decisions early
  • The difference between needs / wants and how to avoid impulse buying
  • Signs that your kids are making good or poor money management choices

Licensed Insolvency Trustees can help you take control of your debt. They are considered some of the best financial advisors in the country and the only ones licensed by the federal government of Canada.

Wayne Kay  0:04  

Welcome to the Debt Matters podcast where we help Canadians find solutions to their debt with Licensed Insolvency Trustees from across the country. I’m Wayne Kay and in today’s show, we’re going to be talking about teaching kids to save money, which is such a great gift. It’s one of the great gifts that you can give your kids. 

To help me with this topic today, Mark Marshall joining me from Allan Marshall & Associates from the Maritimes. And they’ve got offices in Alberta as well, Mark, thanks for being here.

Mark Marshall  0:30  

Thanks for having me.

Wayne Kay  0:31  

Oh, I love talking about kids and money and games, and anything you can do to teach them to save because I did not get taught that. I was taught just basic stuff. But yes, it wasn’t what we did with our kids.

Mark Marshall  0:46  

It’s one of those things, it’s not an easy topic for people. It’s not always about saving. It’s about just understanding income, understanding income, understanding bills. Making sure that you’re kind of controlling the expectation of your children. 

Because anyone that’s had kids know that they’ll stand around, they have lots of wants. And so knowing the difference between wants and needs – just understanding where money’s coming from, where money is required to go, and just setting them off on the right path. Because again, as mentioned, when we were kids, a lot of times that’s kind of hotshot stuff. Your parents didn’t talk about it, they just carried on and they did what they needed to do to survive.

Wayne Kay  1:29  

Yeah, here’s your jars. Here’s three jars. One for giving, and here’s for saving, and here’s for spending. Well, but I got like $1 and a half – what good is that for teaching anything? 

Things have definitely changed, for sure. When we’re talking about teaching kids about money, obviously, younger kids, yes. But are we talking more about teenagers, and when they get into the work world?

Mark Marshall  1:57  

I look at it – it makes sense to me to start talking to kids about money around the age of probably 8 to 10 – in that zone. And then build on it from there. But the premise behind is that kids are smart, and they’re aware.

I look at my own kids, my own kids, and everybody’s kids out there now playing video games. They play Roadblocks of the World. And in those games, they’re required to obtain money to purchase things for their virtual home for their virtual pet. And so, where does the money come from? Well, the money comes from either working in that game or selling something in that game, or you go to mom and dad and ask them for a payment. 

So they have to understand how to spend it and understand how to use it. And so again, I think that the doors to the assets and liabilities or the income and the expenses, that starts to open up around that time, in situations like that.  The wheels start to turn, they understand. So I think that’s kind of your entry point to start having that discussion.

Wayne Kay  3:03  

I like that. So these games, they actually are learning a lot more about it than we did, really? 

Mark Marshall  3:11  

Yes, that’s just when we played games as kids we raced the car, we shot a gun or something, We’re not necessarily worrying too much about spending money in the game. But again, it’s controlling that because, if a kid has an unlimited supply of roebucks, for example, well, they’re just going to spend it. And that’s so different from being in real life. If you have a pocket full of cash, and you have no idea or no clue as to what you’re doing with it, well, you’re going to find you’re spending instead of saving. 

Wayne Kay  3:44  

What’s the best way to get started with teaching kids about money?

Mark Marshall  3:47  

I think just having a general discussion, making it a kind of an open discussion, open concept in your home, explaining the basics. How are you covering the costs of the home you’re living in? Is it a rent, is it mortgage, and you don’t want to stress the kids out. You don’t want to pull them into your stresses, if you have those stresses. 

But it’s one of those things – having that conversation about the internet that you’re playing the game on. Well, it’s not free. It doesn’t pump through the lines. You have to explain that it costs money and the power and the lights. You keep them aware that it’s not all free stuff. And it’s required to make those payments. 

And having those little discussions, they’ll spearhead you with questions. They’ll ask questions of you. And, again, they’re not unaware, they’re aware. And the more you can educate them and kind of drag them along with information, not overwhelm them. Get started early, and they’ll start to understand the debits and the credits.

Wayne Kay  4:50  

Right. So one of the big things that parents do is allowances. Allowances have been around for a long time. Does it make sense to pay kids for chores these days? What do people do?

Mark Marshall  5:01  

I think it does. Yes, I think it does. And people still do it. There’s a couple of things you want to be aware of. It’s fine to pay kids for chores, when they’re going to learn some work ethic and to learn the value of money. So if I put in the time and energy, I’m going to get rewarded for it. You want to avoid just rewarding, because that happens.

It happens in my household. Did you do the chores that I asked you to do? No, but can I still have that five bucks? No, you can’t. Right. So you have to make sure that you’re disciplined in terms of instilling that you have to do the work to get the money. And then again, I think paying them for chores gives them some kind of foundation. They say, Hey, look, I can recognize the value in this dollar. I worked for this, and now I’ve got some money. And then again, you talk to them, and you encourage them – you save that money, it’s your money you do need to do with it. 

But one tip that I would give to parents, is that you should try to make an effort to suggest to your kids is – for every amount of money that they earn, they should try to save 10 to 15% of it. If they made $100, take $15 of it and tuck it away, because you want to establish those good savings habits early on. And if they’re taking $15 of their $100 and putting it away for a rainy day or for an emergency or for some future event, they’re going to start that process. 

I know for myself, I would love to be able to save 15% of what I’m earning, and it’s not easy to do. It’s easier to spend that money because you’re saying, Look, I got the money. But if you can instill it in them early, that will go a long way. 

Wayne Kay  6:42  

And there’s something about getting them their first bank account – where these days, you can get sub accounts as well. I know with our kids, we got them a bank account, but they also had a savings account. They had both, so they had to do that 15-20% had to go into the savings.

Mark Marshall  6:58  

Yes, it makes sense. And again, you if you set those up, and I encourage you to do as a parent, – you set them up and you want to communicate with your kids about what’s happening so that you’re aware because just all of a sudden, there’s measurable savings. Communicate with them so they know the plan. They know where the savings is coming from. Savings come from money you’ve deposited, but it’s taking 10 to 15% and saving it for you.

Wayne Kay  7:22  

Now you said something that you probably don’t even realize that you said. But a lot of parents probably right now just had to stop. What’s he saying? And you don’t even know what it was? 

You said, Let the kids spend the money on what they want to spend it on? How many people always say, okay, you’ve earned the money – maybe you should spend it on this. Right? How do you lose that control and let the kids do what they want to do?

Mark Marshall  7:49  

I think it makes sense to let the kids spend the money on what they want. But talk to them about it, don’t just go blind and say, Oh, you went down the store, you have no money left over. Talking about it, especially early because it’s good to make poor financial decisions early, so you can learn from them. 

When you’re not talking about a lot of money – if a kid saved up $25 and he’s gone down and plays in an arcade, I mean, I’m dating myself. Or he goes and he spends it all on penny candies or whatever it might be, and he comes back and he’s got no money left over. Will you communicate – what did you spend your money on and was it worth it.

Just have those conversations so that they can then learn from wasting their money, small amounts of money on penny candy, versus later in life, potentially wasting their money on something that they shouldn’t be spending their money on. I think that it’s one of those things –  you have the conversation, encourage them to save 10 or 15%. They’ve saved their money now, do what you want. 

In having those conversations, as they get older, you will start to ask them to do some comparison shopping. You want to buy a pair of jeans, but did you look around? Yes, you went to that store, you saw them. You’ll start to educate them to say, okay, look there are other other options out here I don’t have to buy on a whim. 

And again, as a parent, you want to practice that as well. If your son or daughter comes and says, I need this thing, I want to buy it. You’re looking at it and say that’d be great. You want to avoid the impulse buy because again, it’s instilling a kind of poor behavior. You might say look, that’ll be great to have but it’s not in the budget this month and let’s save towards that. And you have that conversation.

Wayne Kay  9:37  

Yes, our daughter, I remember she saved and saved and saved and had to buy a name brand shirt. And then she bought this shirt, and it was kind of disappointing because there was no more money. And then she realized for all that money, she got one shirt and she very quickly became a much better shopper – only spending money on things on sale. So as parents, it’s hard to say, sure go spend that much money on a shirt when you’re only 10.

Mark Marshall  10:07  

But again, it’s a lesson learned. Because if you had bought the shirt for her, and she didn’t earn the money for it, then she’s just going to turn to the bank of dad and say, Dad, I need another shirt. And you know, and you don’t learn anything from that. 

So again, I think that making small mistakes are easy to recover from. So you’ll allow them to kind of spread their wings and, and spend the money but communicate with them on their spending so that they’re aware of what they’re doing with it.

Wayne Kay  10:31  

Are there some signs that you need to really watch to determine how your kids are handling money, or will handle money in the future.

Mark Marshall  10:38  

Well, just pay attention. I’ll give you an example. This past Christmas, I’ve got two children – one is 8 and one is 11. I gave them because they play Roadbucks – as part of the Christmas gift. Here is a Roadbucks gift card, you can upload some credits on your account. 

And so in doing that, my youngest blew the entire gift card that afternoon, gone. I don’t know what she was buying, or what virtual tokens she was buying. My son, now he still has his. A month and a half, two months later, he still has his.

I look at it, I say okay, one one’s obviously a saver one’s not necessarily aware, but at the same time, she is young. But it’s a learning moment where you say, okay, you’re spending it all and now you don’t have anything left. And so if something comes up, you have nothing to buy. So now she’s starting to kind of understand but there’s things that you can do. 

One one thing that I was reading about is that you can – when you’re talking about money or allowances is the jar system. Having a clear jar, not a piggy bank, but a clear jar, and your son or daughter would see the money going in, and they see how much is there. 

If they’re required to purchase something, you’re saying look, grab that money out of the jar, and then they start to see, okay, this is how much is gone. And this is how much is coming out. It’s just a clear indicator, just by the sheer volume, looking through the glass. 

And so that’s one thing that you can try to do to get them aiming in the right direction. You start to see some kinds of behaviors, but I think it’s just you just have to pay attention to them. You have to pay attention if you have a child that’s always asking for more and more and more. I think, again having that open discussion, open dialogue with him about the budget.  How much is coming in? Where’s the money going? And what’s required to be kind of set back to cover household expenses. And it’s just there’s not, quote, unquote, a money tree in the back here.

Wayne Kay  12:49  

Yes, I think the stats said 47% of Canadians are just on the verge of being broke every month. And we look at the expenses that we have now, which are far greater. I’ve done some math just on what we’re dealing with nowadays, versus what we lived with 30 years ago. 

We didn’t have to pay for the internet, we didn’t have cell phones and the cell phone contracts. Those can be running $80 each, maybe even more than $100 bucks. Now, all of a sudden, you have got four family members – because every person has to have a cell phone, especially if you’re a teenager, I don’t know if I know one teenager that does not have a cell phone, but every other teenager has one.  Because that’s their interaction, that’s what they use. But there’s a lot of money coming out of your accounts every month. That’s extra that we didn’t have 30 years ago. So do you charge the kids for cell phones? How do you think families should look at something like that?

Mark Marshall  13:51  

I think what you do is you look at a family plan. Look to see what kind of savings we can generate. Are we able to share the data? Are there things that we can do now? Obviously, with teenagers sharing data could be a scary thing, because it only takes one or two of them, they could destroy the entire amount. But you can also lock the kids down in terms of how much data they can have, or you set it up as a pay as you go. Then again, they’re in control of their own fate. 

You can ask them to contribute some money on a month to month basis to the family pot. Again, you have got to communicate with them. And if you’re struggling, the kids have to make sacrifices as well and they have to recognize it. And be aware that keeping up with the Joneses – it’s hard not to do that. 

But it’s also important to be aware that, hey, we have got to be smart as a family. We got to recognize expenses. Mom and Dad can’t suffer while the kids have unlimited access to their Facebook and Twitter and Tiktok accounts. If you sit down with them, and you say you know what’s important, you want to communicate with your friends, this is what it’s costing us. Here’s what we have to try to do. And again, maybe this is a pay-as-you-go. And if you have to get the kids to pay for it, if they’re working, or they’re receiving an allowance from you, so be it. Again, it’s going to teach them the value of money. It’s going to teach them the value of service.

Wayne Kay  15:17  

My kids had to monitor their data. I never paid for it – by the way, they had to do it. So they’re a little older, they’re kind of in their 20s now. But they were working, they had their own phones, but they had to monitor their own data, because they knew if they went over that that was it. That’s a problem. It’s like, you can’t go over one time. 

And I think – just them knowing that boundary – this is a cell phone company. They don’t care, they would rather take all the money that it can and charge you if you go over. I think those are good lessons for us, even as adults to be paying attention. Because I know a lot of people, they don’t really know exactly where they sit financially.

Mark Marshall  15:59  

That’s right. And you look at it from her perspective, your kids are off to university and school. So if you had sent them out the door, their first year, second year, university with cell phones always being paid, never had to be conscious of how much data they’re using, well, that’s Pandora’s box. They’re going to end up with a massive bill in the first month, and all of a sudden, they dip into their student loan money, or whatever they need to do. And so again, if you can arm them with information and make sure they’re aware, well, it’s going to be sitting in the back of their brains – in terms of making sure that they’re making wise financial choices,

Wayne Kay  16:34  

Right, but we don’t need to stress them out. If we’re in financial trouble, we don’t need to add that stress to them. 

Mark Marshall  16:39  

No, I don’t think so. It’s important to not stress out. You don’t want to sit down with your kids and say, Oh, my God, we’re probably not going to make rent this month. I mean, look, that’s a family concern, but if you can try to avoid it, especially with young children. It’s just making sure that they’re aware so that they’re not stressing you by asking for the latest sneakers, asking for the latest designer shirt. You’re just explaining to them how much money is coming in. 

And I think it’s important, when you look at family budgets or family financing – as kids get older make them aware –  because, one, if you can show them how much money is coming into your household and you’re comfortable doing that – you can show them what the expenditures are. They’re going to have some sympathy towards you, if you’re strapped. 

It’s going to also educate them, to look at it from a broad stroke perspective. They’re going to look and say, okay, what is my mother or father doing for a living right now? What are they making for income? Maybe that’s what they want to do. And that’s fine, but maybe they look and say, here’s an opportunity for me to know that I want to make more. What options do I have, from an education standpoint to make a bit more. I think all of that stuff is intertwined. 

And so I think if you can keep the kids educated, keep aware of the finances of the household, make them semi aware of what you’re earning. And again, you reiterate to them, that’s a confidential conversation. That’s not a conversation that they have with their friends, or online.  Not to tell everyone what mom and dad make, but you can kind of have that conversation. And they’re aware of what the expenses look like. 

Again, it can set them off for the future. Because they’re going to look at their own master plan and say, Okay, what makes sense for me, what do I want to do? What do I want to accomplish? But if they just get out into the world and have no kind of understanding of what things cost, no understanding of how much money has to be earned to cover costs, you’re potentially setting them up for failure.

Wayne Kay  18:42  

I love it. I could just talk about this all day long. But unfortunately, we have a limited amount of time. Any final words of wisdom you want to share with us today, Mark, regarding this topic,

Mark Marshall  18:53  

The final words I’d have is just don’t be afraid to talk about money. People are very afraid to talk about it. They’re afraid to talk about their own finances. And I think share with your partner – discuss with your parents about what’s going on. Again, even regardless – if it’s kids, or if you have a husband and wife team, if you have one person that saves or one person’s a spender, well, you’re always in that zero mark, right? And so you have got to team up. 

So the key with that is to communicate, and then communication will lead to better things. It will lead to the reduction of expenses because you’re aware of what someone else is doing. And then just track what you’re doing with your money. But again, when it comes to your kids, communicate with them, start early, talk to them.

Wayne Kay  19:36  

Terrific. Mark, thank you very much. I really appreciate our time. Mark Marshall is with Allan Marshall & Associates Licensed Insolvency Trustees. And if you’d like to schedule a free consultation or learn more, you can go to their website 

And that’s it for today’s Debt Matters podcast. Make sure you subscribe wherever you get your favorite podcasts. And of course, if you want more information or maybe have a show idea for us as well, by all means stop by our website, Thanks very much for listening.

About Mark Marshall

Mark Marshall has been working in the insolvency field for 20 years. He received his Licensed Insolvency Trustee accreditation in 2012 and has also been an active board member with Music NB. He endeavors to give each client he meets advice on all of their available options so they can proceed with the knowledge they need to make an informed decision.

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