With personal debt levels in Canada increasing every year and savings dropping to all time lows, parents should be concerned that their children might not be equipped with the necessary tools for a healthy financial adulthood. Try this simple guide to encourage good financial habits for a lifetime.

Ages 5 & under:

  • A simple piggy bank, emptied as the child desires, teaches your child the basics of currency (coins, dollars), and the purchase transaction

Ages 5-10:

  • Keep the piggy bank to ensure that a portion of their income is always for “fun”.
  • Add a second account for savings. Help your child split her funds between these two accounts. This second account could be at a financial institution, or simply a second piggy bank.
  • Use this new account for short-term goals, for example, buying a summer swim pass. For larger purchases, you could match deposits for each one your child makes.
  • Avoid using allowance money to encourage behaviour that is already your child’s responsibility, such as completing homework, getting good grades, or not fighting with siblings.
  • Consider discussing the amount of allowance paid, what activities and duties are required for payment and the conditions necessary for the child to receive an increase in allowance.
  • Allow your child to make her own spending decisions for some purchases.

Ages 10-15:

  • Add a formal savings account to help with goal setting, such as travel, schooling or larger purchases made within 1-3 years.
  • At this age group, your child will likely start to receive more income from family birthday’s, allowances and odd jobs around the neighborhood. Discuss the allocation among the different accounts.
  • Assist your child in identifying income-generating opportunities. You might enlist her assistance in your summer garage sale with a commission on sales. You’ll likely be surprised with how many more ideas your child comes up with.

Ages 15+:

  • In a few short years your child will likely receive her first credit card. Ensure she understands interest charges and responsible use.
  • Determine a credit line. There might be times when a snowboard or new roller blades are on sale and all of the other savings have been depleted or pre-allocated. Set the credit amount available for “extra” purchases including re-payment terms, interest charges, and penalties for non-payment.

The important thing to remember is to have fun and keep things simple. Take time to speak with your children about the rationale behind each of the accounts and empower them to make good financial decisions.

Kelley Keehn is an award-winning author, personal finance educator and is the Consumer Advocate for the Financial Planning Standards Council (FPSC). She has written nine books on personal finance including Protecting You and Your Money; A Guide to Avoiding Identity Theft and Fraud and A Canadian's Guide to Money Smart Living. Kelley is the Marilyn Denis show’s personal finance expert, was the host of the W Network’s Burn My Mortgage, sat on the National Steering Committee on Financial Literacy, currently serves on the Financial Consumer Agency of Canada’s Consumer Protection Advisory Committee, the Ontario Securities Commissions’ Seniors Expert Advisory Committee, and is a member of the OECD’s International Network on Financial Education.