How can Gen Z (and younger Canadians) learn how to spend and save responsibly?

Here’s the answer to this week’s reader question about teaching Gen Z to save.

I want to know how to effectively educate our children (belonging to a generation targeted by social media influencers) on responsible spending and saving strategies.

—Jim

How can I teach my kids to spend and save responsibly?

Many Canadian parents struggle with this question. They know that handling money is an important life skill, but they’re not always sure how to teach their kids smart spending and saving habits. The good news is that it doesn’t have to be difficult. A few simple lessons can help caregivers raise money-savvy kids.

The first step is to start early.

Too often, money is treated as an “adult” moment. Kids aren’t expected to think about finances until they get their first job, or when they open a bank account or start paying bills. By then, they’ve already formed plenty of ideas about money by watching the people around them and, as you noted, by scrolling their phones.

You don’t need to be a financial expert to give your kids a solid start, either. Many of the best money lessons don’t involve stocks, investments or a single spreadsheet. They happen during everyday moments, from grocery shopping to giving allowances.

The goal is to make money something your family can talk about openly. Here are five steps you can take. (Steps one to three will help with younger children, while steps four and five are useful as your kids grow up and in their teens and pre-teens. Use the article menu to navigate or simple scroll down.)

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1. Give kids something they can save

For young children (aged three to 10), money is easier to understand when they can actually see it and hold it. A piggy bank may seem old-fashioned, but it turns saving into something they can watch happen. Eventually, the piggy bank can give way to a bank account with, later, a debit card. If your child gets an allowance, encourage them to put some of it aside. As the pile grows, so does their understanding of what saving actually means.

Around 11 to 14 may be a reasonable age for a child to have more responsibility with their money. The key is to increase their independence gradually rather than handing them full control all at once.

2. Make allowances about choices

A recurring allowance can teach more than how to spend money. It can show kids that one pile of cash can have several jobs. If you give your child $10 once a week, for example, encourage them to divide it between spending and saving.

You can also give them an extra reason to save by topping up the money they do set aside.

Say your child puts away $2 of their $10 allowance each week. You can add another dollar to their savings. Suddenly, the benefit of saving becomes real, and there’s an incentive to build wealth. It’s like RRSP matching!

That alone gives children an early lesson in how small amounts of money can add up over time.

3. Make kids wait before buying

We’ve all seen it. A child spots something in a store, and suddenly it becomes the most important purchase in the world. Cue the dramatics.

Instead of automatically saying yes or no, try saying, “Let’s wait.” Give them a couple of days to think about it. If they still want the item after 48 hours (which seems like a week in “kid time”), you can decide whether to make the purchase.

The waiting period teaches an important lesson. The initial excitement may fade, giving your child a chance to decide whether they really want the item or simply got caught up in the moment. Learning to stop and think before spending is a habit that will be useful long after the toys are gone.

4. Let them manage a real budget

The grocery store can be a surprisingly good place to learn about personal finance. Next time you go shopping, give your child a list of household items to buy along with a spending limit. Let them help decide what exactly goes into the cart and what stays on the shelf. Have them add up the running total, too.

They’ll quickly discover that a fixed amount of money means making choices. You can’t have everything.

That’s a more powerful lesson than simply telling a child to budget. Now, they have to decide what matters most, what the family can afford and what they may have to do without.

5. Admit your own money mistakes

One of my favourite sayings is “Money see, money do.” It’s one of the most important ideas for parents to understand. Children don’t just listen to what you tell them about money. They watch what you do with it.

If you want your kids to save, let them see you putting money aside. If you want them to think carefully before spending, show them that habit in your own life. (Hint: if you spend wildly, they may, too. No amount of lecturing can change that, so keep that in mind, especially when you’re kids are young and more impressionable.)

And don’t try to hide every financial mistake you’ve made. If you’ve carried a large credit-card balance, bought something you didn’t need or made any other money mistake, there’s a lesson worth sharing. Explain what happened, how you fixed it and what you would do differently today.

You can even ask your kids what they think you should have done. Children often enjoy being asked for their opinion, especially by an adult. It turns a money conversation into a chance for them to think through a problem themselves. It also shows them that making a mistake with money doesn’t mean the conversation has to end. You can learn from it, fix what you can and make a better choice next time.

Ultimately, you don’t want spending and saving to be an abstract concept. You want your kids to feel comfortable making money decisions, talking about those decisions and understanding that mistakes are part of learning.

One more note: In my book, Seventeen to Millionaire, I point out that teenagers should approach their parents about money too, rather than waiting for parents to open up first. (To break the ice, for example, ask them whether they have any investments. Or do they know their credit card’s interest rate?)

After all, when it comes to kids, adults, and money, the conversation should go both ways.

Read more from this issue of The Get:

1. Why scammers are suddenly interested in your internet cookies
2. Do you have to buy everything, right now, all at once, for back to school?
3. Lawyer Jordana Goldlist is changing how we think about criminal offenders
4. What is a prenup agreement? Should Canadian couples get one?