Her besties, who are a year older and permitted to leave the school grounds at lunch hour once a week, have been frequenting a nearby bubble tea shop and picking one up for Matilda, too. Unfortunately, Matilda’s five-dollars-a-week allowance barely covers her bevvy of choice. And, recently she was disappointed to realize she didn’t have much accumulating in her coin purse. It made me wonder if I’m setting a bad example, or at the very least, not giving her the tools she needs to be smarter with her money.
At least I’m not alone. According to a recent survey by Mydoh, a saving and spending app for kids, 54% of Canadian parents feel like their own parents weren’t proactive enough in teaching them about money and budgeting. And another 46% felt they needed to unlearn unhealthy financial habits, like spending more on wants versus needs. (Hello, coffee habit.)
Teaching kids about earning—and spending
Until recently, Matilda’s interactions with money have mostly involved seeing her dad and I spending it. Whether I’m tapping Apple Pay at a clothing store, or he’s swiping a debit card at the gas station, she’s very familiar with the money-going-out concept. Unfortunately, Matilda doesn’t see us contributing to our registered retirement savings plans (RRSPs), discussing how we might afford retirement one day, or setting savings goals for home improvement projects or family holidays.
Not that kids should be privy to all the nitty-gritty details, but we should let her in on more of our financial decision-making. Research shows that kids who grow up with parents who aren’t open about their finances, or who argue about it, tend to have more credit card debt in their college years. And, in one Canadian survey, 15-year-olds who talked to their parents about money at least once a week scored 33 points higher in financial literacy.
Of course, ultimately, kids will need to have money of their own if they’re really going to learn how to make good decisions about it. Like many parents, we are of the thinking that an activity-based allowance system will instill important lessons about earning cash. So, about six months ago, Matilda started earning an allowance.
We have a chore chart on the fridge with a list of tasks to be checked off each day, ranging from making the bed to clearing the dinner table, and she doesn’t get her five bucks at the end of the week unless they’re all ticked off. In this respect, I think we’re doing well. Check! But we haven’t adequately defined what her allowance is really for—a fact that became especially clear when I found myself reluctantly buying Robux (the virtual spending money in Roblox, an online gaming platform for kids). And, until recently, we never discussed all the ways Matilda could think about saving her money, either.
Setting a spending goal
Curbing impulse spending and learning to set larger financial goals is the big ambition here, but getting the hang of delayed gratification is a kicker. (“Why save my allowance when I can have a large mango milk tea, like, today?”Kid, I get it.) Though it can be a difficult lesson to master, it is crucial—and the sooner, the better. I came across a Cambridge University study which showed that several of kids’ key money habits, including delayed gratification, can be set by age seven.
Clearly, it’s time to double down on goal setting. According to many financial experts, short-term goals, like saving for a toy, makes the most sense to kids. So, a few weeks ago, Matilda set a goal of saving for a new book she’s set on reading, the latest in a series she’s been working her way through since last summer. It’s a relatively small purchase, but it’s a big deal to her.