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The earlier you start a child's financial education, the better. But whatever their age, it's never too late to teach children how to manage money responsibly.

Repeating the phrase money doesn’t grow on trees to kids can be easier than putting it into practice. As a parent, you want to give your kids the world while also teaching them how to survive on their own. Your children will learn lessons about money one way or another; however, money management lessons learned at home can shape a lifetime.

Read on for five financial literacy tips your children can use throughout their lives.

1. How to be a smart spender

It is important to teach how money isn’t just for spending. Introducing your kids to an allowance can give them hands-on experience. While making purchasing decisions, teach kids that spending isn’t always about buying things they want at that moment.

  • If a younger child wants to buy an expensive item, introduce the concept of saving up with the intent to purchase the item. You may also want to teach them about comparison shopping in order to find deals on items they want.
  • With older children, you can broaden discussions about spending money to help prepare for when they are adults and will have to allocate funds for living expenses such as a mortgage or car loan.

2. How to balance spending with saving

Learning to save teaches discipline, goal-setting and planning. It can help build financial security and independence. If your child doesn’t have a basic personal savings account, talk to them about setting one up, possibly with a debit card if you feel it’s appropriate. An account that caters to children can be a helpful educational tool to learn about everyday banking, illustrate what savings are, and understand how savings can build over time.

Teenagers with part-time jobs and young adults starting their careers may do well saving for short-term purchases or goals — rather than for their future. You can introduce long-term savings and investments after observing their spending habits and discussing their desired lifestyle.

3. How to borrow money responsibly

Consider giving younger kids the opportunity to borrow a small amount of money from you, perhaps for a special purchase, with a defined time for when they must pay you back. With older children, helping them understand credit basics is an important step on the road to financial independence. Discuss concepts of borrowed money and interest along with how to use credit responsibly.

To help foster healthy spending behaviour, you may want to give your teenager a joint credit card with a low limit to help them better understand how to use credit wisely.

4. How to start giving to those in need

An important part of financial literacy can be how to use money to make a difference for those in need. If one of your family values is giving to others, you can help kids develop their generosity by helping to make it a habit for them early on. You may encourage your children to set aside an amount of their allowance or earnings to donate later. Then help plan their giving by discussing and researching potential groups or causes they may already be interested in or want to support.

5. How to build a budget

Budgeting is an important lesson at any age, but budgeting may become more important as your children mature. Sit down with your older children to help them understand their short and long-term goals (e.g., rent, food, living expenses, cell phone plans, new car, vacation, first home) and work with them to create a realistic budget. Introduce the “money in versus money out” formula to help them better understand needs and wants — and what is required to reach their financial goals.

Be mindful that they also need to see you making smart spending and saving choices. In short, practicing what you preach, can help develop healthy money habits your kids may carry with them for a lifetime.