None of us knew anything about money

When I was a little kid, I didn’t know anything about money. All I know is that if I wanted something, I would say: “Mommy, I want this…” and sometimes my mother would buy it. If she didn’t buy it I would cry. After the crying, sometimes she would give in and buy it, sometimes she would stand her ground and not buy it.

When I started school, my parents would give me money to buy food in the cafeteria, usually the greasy stuff that kids still eat today.

I grew up in Colombia. I remember that when school ended, there were vendors selling delicious mangos outside. I always wanted one, and that was my greatest need for money.

I asked some of my friends if their parents ever taught them anything about money. ALL of them said “no.”

Kids envy

I was a privileged kid. My parents were well-off and gave me everything I needed, but when I saw other kids with cool toys I didn’t have, I would cry with envy.

Some ideas to teach kids about money

1. Involve Them in Transactions: When you go to the store, give your child the money to hand to the cashier. This helps them understand the exchange of money for goods. Unfortunately, this doesn’t work as well with credit cards.
2. Offer Opportunities to Earn: Give your child a chance to earn some money, maybe by helping with tasks like cutting the grass or shoveling snow.
3. Introduce Saving: Give your child a piggy bank to show them the value of saving.

Don’t buy your kid’s love with money

My father had lots of money but was never present. I loved him because every time he came back home, he brought gifts for everyone. As I grew up, I realized he wasn’t a great father. He was focused on himself, his money, and his work. We were neglected. I would have preferred to be poor with a present father than wealthy with an absent one.

My father cheated on my mother and was rarely around. He compensated for his cheating and absence by showering us with gifts and money—hardly a great lesson for a child.

I wasn’t a great father either. My girlfriend and I separated shortly after she gave birth to our wonderful baby girl. The mother moved to another state with her new husband, and my life circumstances prevented me from visiting my daughter. Now that my daughter is an adult, I feel I should make an effort to get closer, but I just haven’t.

Lessons to Learn

1. Don’t Cheat on Your Partner: Your child will think this is normal and may cheat on their partner in the future. Unfortunately, I have cheated on my partner. Thanks for the great example, Dad.
2. Don’t Buy Your Child’s Love with Money or Gifts: Be present! Your child will prefer your company and love rather than a new toy.

Money management for kids

Allowances

My mother used to give me allowance money with no strings attached. The money was for food in the cafeteria.

Don’t give an allowance for free. Make your kids earn it. From an early age, they should be responsible for something. This will teach them the value of earning money in exchange for some kind of effort.

Extra Money for Kids’ Whims and Desires

When kids hit their teenage years, they become more independent and want new gadgets, computers, designer clothes, cool shoes, and concert tickets. They begin to ask for higher-ticket items.

At this age, it’s good to tie money to some kind of performance. For example, if they get good grades, they get rewarded. If they help out with certain tasks, they get something in return.

Teenagers Hustling for Money

When I was 14 years old, my father went bankrupt. He separated from my mother, and we went from wealthy to poor.

At this time, I learned how to hustle for money. I washed cars, cut lawns, and painted houses.

If your child shows any entrepreneurial inclinations, be sure to encourage them as much as possible. You can learn more by being an entrepreneur in real life than by taking many university courses.

Extracurricular Activities

Sports and other activities can get very expensive, especially if your child is talented. Those hockey, football, and soccer practices, plus the trips to events, can really add up. In my opinion, if I could afford all those activities, I would go for it. Pay for all the piano lessons and ballet practices your child can absorb—it’s a great investment. On the other hand, be tight-fisted with frivolous spending like branded sneakers or fashionable skirts. Your child will learn that spending on positive things is allowed, while frivolous spending is discouraged.

Your Child Gets Their First Job

This is the best time to teach your child about investing. As much as parents think talking about sex and drugs is important, talking about investments is just as crucial. If you teach your child, as soon as they get their first job, about the importance of investing, and if you create the habit of making them save at least 10% of their earned money, while teaching them about low-cost index funds, ETFs, and Tax-Free Savings Accounts, your child will be on their way to financial success.

I started investing in my early 30s. If I had started when I was 18, 20, or 22, I would be a millionaire by now.

Going to University

This is a crucial moment. School is expensive. Recently, I met a girl who came to Montreal with her parents to visit McGill University. As an international student, she was facing an $18,000 CAD per year expense. The other consideration was an Ivy League school with a $70,000 per year price tag. I don’t know how there was anything to think about. Obviously, those parents hadn’t taught their daughter about the cost of education, and the girl clearly didn’t have the least consideration for her parents. There was a lot to learn on both sides.

During this time, parents should teach their kids about the cost of education, how to get credit, how to apply for scholarships, how to borrow money, how interest rates work, and how to avoid them.

Don’t Sacrifice Your Retirement for Your Child’s Education

If you have the money to contribute towards both your retirement and your child’s education, go ahead and help out or pay tuition and other related expenses in full.

If you don’t have the money, there’s nothing to think about—you don’t have the money. End of story. Don’t go into debt to pay for your child’s education.

If you only have money to pay for either education or retirement, but not both, don’t sacrifice your retirement to pay for your child’s education. Sure, the greatest gift you can give your child is an education, but it shouldn’t come at the expense of your retirement. Your child will have many options, while you, as an older person, won’t have as many.

Don’t Spend Money on Your Child’s Wedding

You might have read my previous article about my opinion of big weddings. I try to discourage them. Instead, I encourage small, intimate weddings, for the least amount of money possible. The average cost of a wedding is about $30,000, which I think is ridiculous. If you want to help out, please don’t give more than $1,000. If your child wants a big wedding, let them pay for it.

After Your Child Becomes an Adult

There comes a time when your child becomes an adult. At this point, you are supposed to be there as an advisor, but please don’t become your child’s savior every time they run into financial difficulty. By being that savior, you will do more harm than good. If your child gets into debt, giving them money will not solve the problem; there are bigger issues they need to learn on their own.

Also, keep in mind that after your child is an adult, they are no longer your responsibility. Don’t jeopardize your retirement and financial well-being for your child’s. Some help is always nice, like the help my mother gave me once by contributing to the down payment of my first property, but constant help is harmful.

Other personal finance blog posts

• Index funds is the active manager’s worse nightmare
• Beyond RRSPs: Understanding RRIFs to Secure a Comfortable Retirement
• How Canada’s Old Age Security Program Provides Stability and Dignity for Seniors