In their early years, children believe money comes from the tooth fairy. Over time, they grow and mature and their financial knowledge needs to grow with them. How can we help our children with the knowledge they need to become savvy savers, consumers, and investors? Financial literacy can be quite a journey, but it’s never too early to start. Here’s a round up of our best age-appropriate suggestions to get the right conversations started.

Pre-teen years

Start with lessons from allowance

Allowance gives you the great flexibility to teach whatever financial basics you want to focus on first. Whether it’s earning, saving, spending or even basic addition – it’s a great tool to start with. When children are in their tweens, you can tie allowance to either doing household chores or completing special tasks, so they can gain an appreciation of work and earning. If allowance is regular spending money, children can learn to budget their dollars until next between ‘pay days’ or opt to save for something big.

Explain key concepts

When you share financial information, your tweens or teens can learn a lot about the financial world. Tell them about your mortgage payments, explaining the concept of principal and interest. Teach them about the Registered Education Savings Plan (RESP) that’s in their name. Show them the water bill and help them grasp the idea that water, heat, and energy are not in fact not free.

Consider a debit card

During high school, a debit card can be an effective tool to teach children about money management. If the funds are the child’s own earnings from a part-time or summer job, they may develop an appreciation for spending on needs versus wants. If you’re funding the debit card, you have an opportunity to teach your child about sticking to a budget.

College and University years

These are the bridge years, when your child can and should assume greater financial responsibility, freedom, and knowledge.

Keeping a budget

Using a budgeting app could be an effective way for your child to get started on tracking expenses. All that’s needed is a monthly report of where money was spent by category – including food, cell phone, transportation, education costs, entertainment, rent, and others. This report might show what’s on track, and what needs tweaking; it may shed light on expenses to be cut back, or demonstrate the possible need for more funding.

Investing basics

If you have your child opens a Tax-Free Savings Account (TFSA) upon reaching 18 (or 19 in British Columbia, Newfoundland, New Brunswick and Nova Scotia), you can gift funds that your child contributes. Ideally, the arrangement is that your child learns some investment basics in return for the gift, either from you, or from a trusted online source. This would be a good time for them to acquire basic knowledge of stocks and bonds, risk, diversification and time horizon.

Filing tax returns

Though your child isn’t obligated to file a return unless tax is payable, filing offers several benefits. Even if your child has little or no income, filing enables a student to claim the tuition tax credit to use now or carry forward. At 19, your child may qualify for the GST/HST credit, payable four times per year. Reporting income creates Registered Retirement Savings Plan (RRSP) contribution room to use later. If income tax was deducted from pay cheques, your child may receive a refund.

Managing money is a learning process, so don’t worry if your children make a mistake or two along the way. The more mistakes they make, the more opportunity they have to learn in a safe environment. Be sure to praise them for progress when they’re doing well and encourage them along the path to becoming financially responsible. It’s a skill they will never grow out of!