AS YOUR KIDS become a little older, you will be noticing many changes. Hopefully they’re a little more responsible and mature, and certainly at this age they have a better grasp of math. Perhaps they’re more interested in money now than when they were younger. But just like younger kids, preteens have money choices, and as parents it’s your job to give them the right tools and knowledge to make sensible ones.
Because your preteen is also a little more independent, they have the opportunity to earn money by working odd jobs. A job can make them more responsible. For many preteens, their first job is babysitting. Schools often offer babysitting training and “certification” for kids in Grade 6 or 7. So encourage your kids to find babysitting gigs for extended family, friends, or neighbours.
“When I was around eleven, I loved babysitting my neighbours’ three kids. I didn’t really have a social life yet, so I didn’t feel like I was missing anything if I babysat on the weekend. The kids were usually well behaved and went to bed early. I would play games with them, maybe watch a movie, and read them a story before bedtime. Sometimes the oldest boy would stay up with me to watch the hockey game. We lived right across the street, so I knew I could call my mom to help me if there was a problem. And they always had the best snacks! Looking back, it was probably the easiest money I ever made.”
Other jobs that are suitable for your preteen include shovelling snow, washing cars, or cutting grass. Encourage them to be creative when looking to make extra money. If they’re technically inclined, perhaps they can tutor an adult on computer or social media use (sometimes referred to as “reverse mentoring”). Or, if they’re strong academically, maybe they can tutor younger students in reading or math.
These jobs are likely to pay differently. The going rate for an hour of babysitting may be less than they can make washing a car for an hour. If your preteen is trying to save up for something specific in a very short period of time, he may look for the job with the highest pay.
At this age, if they like what they’re doing they’re more likely to stick with it. They will get to experience the satisfaction of doing something they enjoy and doing it well — and getting paid for it! As they get older and start thinking about career choices, this will be an important message: when you’re passionate about what you do, it doesn’t feel like “work.”
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Family Discussion What Sort of Work? |
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• Discuss how many hours your child would have to spend babysitting versus washing cars, or mowing lawns versus tutoring, in order to save for a specific goal. • This is also an opportunity to talk to your kid about choosing work that he enjoys. |
As highlighted in Chapter Two, different parents have different philosophies about allowance. Some see it as payment for chores, some see it as a way to teach their kids money management skills, and some see it as both. Usually when kids are in their preteen years their allowance increases, and therefore the stakes get higher about how they use it. What’s important is that you’re clear with your kid about what your philosophy is and that your kid understands why she’s getting an allowance, why it’s the amount it is, and what her responsibilities are regarding how the money will be used.
What motivates your preteen? Is she motivated by extrinsic rewards like money? (There’s nothing wrong with that — we’re all motivated to varying degrees by money.) If that’s the case, paying her to do her assigned chores will ensure they get done and will give her some money to manage. But if she doesn’t do her chores, do you take away her allowance? Often, as parents, we do this as a knee-jerk reaction because it feels like the only leverage we have. But we’re probably better off letting our kids get their allowance so they can continue to practise managing money. There are plenty of other consequences that can be meted out for not doing chores — like less time on the computer, phone, or Xbox!
“When my daughter doesn’t do her chores, rather than take away her allowance, I take away access to the computer, her phone, and video games — things I don’t want her spending so much time on anyway!”
But maybe your kid is intrinsically motivated. Does he have the drive and discipline to do his chores or his homework without connecting it to his allowance? If that’s the case, then his allowance can be given as a pure money management tool.
Finally, you can always give your kids opportunities to earn extra money by doing things around the house that go above and beyond their normal responsibilities.
“My kids were always looking for opportunities to earn a little extra money. So, I told them that if I had to hire and pay someone to do something, like mow the lawn, shovel snow, or rake leaves, then I would be happy to pay them instead. But taking out the garbage did not count — I certainly wasn’t going to hire anyone outside the family to do that!”
The age formula that you used to decide how much allowance to give when your kids were younger is probably no longer appropriate. At this stage, their allowance should be based on a budget.
“When my son turned eleven, he asked for a raise in his allowance. I told him that if he wanted to get more money, he had to take a course about money that his school was offering as an after-school program. To my amazement, he agreed!”
Should you still use cash to pay your preteens an allowance? Many parents don’t often use cash or have it handy on allowance day. That’s where digital payments and apps come in. You may find that not only are they more convenient for you, but they also teach your kids about money. For examples of apps you could use, please see our Further Resources at the end of the book and at cpacanada.ca/moneysmartkids. Although apps can be great tools, they’re no substitute for parental guidance and ongoing discussions with your kids about money.
Once your child receives his allowance, try to resist the urge to get overly involved in what he does with it. Explain that he should allocate his allowance to the different categories of save, spend, share, and invest. You can be somewhat hands-off, as his spending should be guided by the budget you created together. Allow him to make his own spending choices and to live with the consequences of his own decisions. However, it’s still a good idea to sit down regularly and see if he’s managing to stay within budget.
The budget may need tweaking if you’ve under- or overestimated his spending. Also, debriefing after a big purchase or a money mistake is always valuable. We’ll discuss this later in this chapter.
“The hardest thing I’ve had to do as a parent is let my kids fail at something and face the consequences. It’s no different with money. They need the freedom to make mistakes and learn from the consequences. I don’t rescue them, but I also don’t say ‘I told you so.’ I don’t always make the right financial decisions either, so it’s important for them to see that we all learn from our mistakes.”
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Family Discussion Allowance |
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• Sit down with your preteen and review what their typical week looks like: when, where, and how they’re likely to need money and how much is reasonable. • This is money they’re going to spend anyway, so use their allowance to start shifting some of the responsibility to them. • Making the budgeting process collaborative will give your preteen a sense of empowerment and control over their spending. It will also result in buy-in. |
Around this age, your kid is ready to graduate from a piggy bank to a bank account. The advantages of a bank account include the opportunity to earn interest on their savings as well as the security of having their money in a safe place. If you bring your child with you to a brick and mortar branch to open their first account, try to do most of the paperwork with the bank ahead of time. Sometimes these processes take longer than you expect, and you don’t want your kid to get bored and lose interest — this should be an exciting day! Another option to consider is a digital or online-only bank, where the entire account opening process is done on a computer or phone.
Some kids may resist because it feels like they’re losing their money. So, show them their bank balance and how it keeps growing every time they empty their piggy bank (or their savings compartment) to make a deposit. That should encourage them!
Youth accounts are special accounts designed for young savers. While generally there are no fees, they also pay very low rates of interest, which makes this the perfect time to discuss the concept of interest with your preteen: the bank is paying them to keep their savings there. You may also want to add that if you have to borrow money from the bank, they will charge you interest for using their money.
Let your kid know that the bank card they get with their account can be a convenient way to make withdrawals and to check their balance online. (More about debit cards below.) With a youth account, often withdrawals are limited by the bank; for example, up to $20 or $25 per week. Your preteen will be responsible for creating and protecting their own PIN, but you may want to reinforce the importance of not telling anyone what their PIN is, not even their closest friends.
An effective way to encourage preteens to save toward a goal they’ve chosen is to offer to match their savings. In fact, you may even have experienced matched savings yourself if you work for a company that matches retirement or other savings. Also, if you have contributed to an RESP for your child, the government gives grants of 20 percent of contributions made to an RESP (up to $500 per beneficiary per year). For the recipient, this is like getting free money, and most rational people would take full advantage!
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Family Discussion ATM Use |
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• Do you think your preteen is ready to make unsupervised ATM or bank branch deposits or withdrawals? • Do you trust them to keep their own bank card and to safeguard their PIN? |
While on the topic of bank accounts, you can talk to your preteen about how you use a chequing account. Explain that writing a cheque is one way to pay someone; it is often more convenient than using cash and also more secure. Only the person to whom the cheque is written can cash it and, unlike cash, if a cheque is lost or stolen you can stop payment on it. Cheques are certainly preferred when you have to mail a payment.
Electronic transfers (e-transfers) are an even more convenient way to send, request, or receive money directly from one bank account to another. With Interac e-Transfer, all you need is access to online or mobile banking through your financial institution and you can send money to or request money from anyone with an email address or mobile phone number and a bank account in Canada — without sharing any personal financial information.
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Family Discussion ATM Use |
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• Show your preteen how you keep track of the money in your chequing account by recording every cheque you write as well as other additions to and withdrawals from the account, such as automatic bill payments and e-transfers. • By balancing your chequebook (reconciling it to your bank balance), you’re modelling financial responsibility for your child. • You’re demonstrating the importance of keeping track of your money, knowing if you have enough to cover any cheques you write or withdrawals you make. • You can explain that if you “bounce” a cheque, the bank charges a big fee and the recipient doesn’t get paid. • Explain that managing your bank accounts and paying bills online is extremely efficient and convenient. |
Emma Taylor and her best friend, Allison, really wanted new headphones. When Allison asked her mom to buy her new headphones, her mom told her to start saving her birthday and holiday money. She also recommended that Allison save some of her allowance or do some extra work around the house to earn even more money. At first, Allison worked really hard to earn extra income and was really disciplined about putting her savings in her piggy bank. She was well on her way to saving enough for new headphones.
One day, when Allison was out with her friends, she told them how much money she had in her piggy bank. Her friends begged her to buy them ice cream. Allison wanted to be generous to her friends, so she took some money out of her piggy bank to treat her friends. Next, they wanted to go to the movies, and they wanted Allison to pay, since she had so much money. She didn’t know how to say no, so she took some more money from her piggy bank. She also sponsored one of her friends in a charity walk. Every day, Allison kept finding more and more interesting things to spend her money on. But she wasn’t saving for new headphones anymore. When she spent her money on other things, she gave up saving for new headphones.
Emma planned differently. She earned income from doing extra chores around the house. She used her multi-slotted piggy bank to save most of her allowance and birthday money, but set a little aside for spending today and some for sharing with others. When Emma’s friends begged her to buy them ice cream, candy, or movie tickets, she’d tell them that she was saving for new headphones, but she’d always remember to buy her friends a special treat on their birthdays. Before too long, Emma had saved enough money to buy new headphones.
Emma and Allison met at the mall so Emma could buy her new headphones. When they got there, Emma could see that Allison was really upset. Allison had spent all her money, and now she couldn’t buy the one thing she really wanted — new headphones. Emma felt bad for Allison, but she was also happy that she had stuck to her plan and achieved her goal. She not only had enough money for new headphones, she also had a little left over for a pizza, which she shared with Allison to cheer her up.
Today’s kids are becoming consumers at an earlier age than kids in the past. By the time they turn twelve, they’re making a lot of financial decisions on their own. Because our society places a lot of emphasis on consumption, and with the added pressures of social media, it can be hard for preteens to resist the desire to buy things. At this age, they spend money quickly and impulsively. Between the ages of nine and twelve, kids will develop consumption habits that stay with them for the rest of their lives. But they will also learn a lot from the mistakes they make — if you let them.
As we discussed earlier, giving your kids an allowance is one way to transfer some of the responsibility to them while also helping to reduce requests for money. When kids are spending their own money (even if you give it to them as allowance), they tend to think a lot longer and harder about a potential purchase, whether they really need it or just want it. “It’s not worth that much, I don’t want it,” is something kids say when they have to spend their own money. When they’re spending your money, it doesn’t seem to “count” in the same way, and there is often less deliberation. Decide who pays for what and what comes out of their allowance by referring back to the budget you created together.
“My twelve-year-old brother is much younger than me — eighteen years younger — so I often feel like a parent as much as a sister. When I take him to the mall, I remind him to bring his own money, in case he wants to buy something. As we walk through the food court, he always insists he doesn’t want anything, he’s not hungry — unless someone else offers to pay!”
Preteens are exposed to a lot of advertising, through the Internet, TV, product placement, and especially social media. They’re also exposed to advertising in public places, like public washrooms, taxis, public transit, and outdoor billboards. Even though they can distinguish between content on YouTube and a commercial, they don’t necessarily understand that the purpose of the commercial is to seduce you into buying things you wouldn’t otherwise purchase.
“I try to explain to my preteen son that commercials and ads are designed to make him think that he needs a certain toy or pair of shoes in order to be happy, when really he just wants them because they’re cool. I try to get him to think critically about the ads he’s seeing. I point out how they exaggerate the benefits of their products and downplay the negative features, and we laugh about catchphrases like ‘healthy-looking skin’ (shouldn’t it be ‘healthy skin’?).”
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Family Discussion Debrief Purchases |
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When your kids save up to buy something with their own money, make the time to debrief afterwards with the following questions: • Did they think it was worth the money? • Was it worth the effort involved in earning it and saving for it? How many hours did they have to work to be able to buy it? • What did they like or dislike about the shopping experience? • What, if anything, would they do differently next time? |
Even though you still have primary influence over your preteen’s spending, at this age they rely heavily on what their friends think. By age twelve, most kids will side with their peers over their parents when it comes to purchasing decisions. This has been amplified by social media, where they’re bombarded with images of what others have and do. They recognize brands and like to have the latest clothes, shoes, or cell phones and know exactly where to buy them.
Today’s families are smaller than in previous generations, and where there are two people earning salaries, there tends to be more disposable income. Some parents compensate for a lack of quality time spent with their kids by buying them things. This undermines messages about teaching kids the value of a dollar.
“Growing up, my family didn’t have a lot of disposable income. My parents were able to provide for the necessities, but they could not afford the little extras like the cool brand of shoes or the hottest toy. I want my kids to have more than I had, and I want them to fit in. I feel guilty when I say no to something they want.”
The way kids communicate with each other now — digitally rather than face to face — is radically different than it was when we were growing up. The average age at which kids get their first smartphones is around ten years old, but exposure to mobile devices begins much earlier. We’ve all seen young kids on planes and in restaurants playing with iPads! Many parents are concerned that a phone will overtake their child’s life, and their concern is well founded. Apps are designed to be addictive. For these reasons, every family has to decide for themselves at what age a cell phone is appropriate and affordable for their preteen.
At this stage, you’re most likely to be the one paying the cell phone bill. However, your preteen should still be accountable for her data usage. Find the most appropriate package and be very clear about the cost of going over. If she does go over, she should be held accountable for paying the additional costs.
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Family Discussion Cell Phones |
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• Is your kid responsible? Will they make sure the phone doesn’t get lost, damaged, or stolen? • Are they self-disciplined? Will they be able to follow rules about usage, for example, not using it in school and turning it off at night? • Do they need it for safety reasons? Perhaps they walk to school alone or take public transit often. It may make both of you feel better to be reachable. |
Grocery shopping provides lots of opportunities to teach responsible money management. While you’re at home, let your kids help you make the shopping list. Let them see that you plan your meals in advance in order to avoid buying expensive takeout or restaurant meals. Remind them that feeding a family is a significant component of a household budget. Explain that shopping with a list means you’re less likely to make impulse purchases and therefore keep within your budget. It also gives you ammunition in the junk food aisle when your kids start pestering you to buy all kinds of stuff: “It’s not on our list!” Going down the list, your kids can be the runners, picking items off the shelves. You can use this as an opportunity to teach them to comparison shop. Have them compare different brands, including store brands, to see which offer the best value. You can explain to them that the cheapest product doesn’t always offer the best value if it isn’t good quality. You may also want to point out that name brand products are more expensive than store brand products. This is because the name brand product includes the costs of marketing and advertising.
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Things to Do Comparison Shopping |
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• For fun, do a blind comparison test in your house of name brand versus store brand products to see if you and your kids can tell the difference. • Try this with soda, cheese, crackers, cookies, and paper towels. If your kids do prefer the more expensive brand, ask them if they like it enough to pay the extra money. |
“I like to be thrifty. When my kids were young, they used to help me do the grocery shopping. First, we would go through the flyers and the coupons and see what was on sale. At the store, my kids would try to find items in our price range and look for the best value. I remember once asking my son to go get something we needed, but he came back empty-handed: ‘Mom, it wasn’t on sale.’”
When your preteen opens a bank account, she’ll get a bank card that can also be used as a debit card in stores. As with ATM withdrawals, there are usually limits as to how much she can purchase by debit card per day. Make sure your child understands that she must have money in her account to cover debit purchases. Money must first be deposited before it can be spent.
Also, it never hurts to remind her not to disclose her PIN to anyone, although a PIN isn’t always needed to authorize a purchase. Most debit (and credit) cards in Canada are embedded with chips that will allow your child to pay electronically, usually up to $100, just by tapping on a checkout reader. So, remind her to be very careful not to lose her card!
Be sure your child understands the difference between a debit card and a credit card. If you haven’t done so already, take the time to teach her what a credit card is and how it works (see Chapter Two, “At a Restaurant”). It’s also a good idea to discuss the power of compounding, that the amount you owe keeps growing if you don’t pay your balance off by the due date (see “Simple versus Compound Interest” in Chapter Four).
Digital spending offers some unique challenges for parents. Just as spending your money doesn’t feel real to your preteen, making digital purchases by tapping with their debit card or phone doesn’t feel real either. Taking actual cash and handing it over to someone else definitely does! There is a psychological pain of loss associated with spending cash that we don’t experience when we pay digitally.
Remind your child that even if they’re not using cash, they’re still spending real money, whether they’re using their debit card, phone, a gift card, or your credit card or PayPal account. And if your kids do buy things online, consider having them reimburse you in cash.
In Chapter One we discussed how and why you’re important role models for your kids. They don’t absorb just your behaviour but your attitudes too. Fostering an attitude of gratitude begins with you showing appreciation for what you have instead of focusing on what you don’t. (If you haven’t already done so, take the Role Model Self-Assessment at the end of Chapter One.) If you don’t want your kids to have an attitude of entitlement and take things for granted, then you must continue to show them that you work hard for the money you make, you spend it carefully, you value the things you buy, and you look after them.
“I think you need to set up expectations for your kids early on. You can’t give them everything. They need to earn it. You need to start by being a good role model yourself. I was raised by a single mother, and growing up, my mother always kept us in the loop about our family finances. We knew that she could only afford to buy us our favourite toy once a year, and we respected that. We treated that toy very well.”
Preteens often complain that they’re “deprived” because we say no to so many of the things they want. One way to put things into perspective for them, as we discussed in Chapter One, is to show them the household budget, reminding them of all the other needs that have to be provided for. Another way is to help them realize that there are others less fortunate than they are, others they can help. While they may take for granted that they will always have clothes and shoes that fit, there are other children who are not so lucky.
“I get my kids to participate in deciding what to do with the toys and books they don’t use anymore and the clothes that no longer fit. Together we go through their closets and take out any clothes that they can’t or don’t wear anymore. Then we drop them off at a charity in our community. This teaches them that stuff — even their old stuff — has value, and people are grateful to receive it.”
Although kids this age are too young to understand a lot about investing, here are two ways to introduce them to some basic concepts.
We tend to focus on teaching kids how to work for money, rather than teaching kids how to make money work for them. After the Taylors had mastered Monopoly, they found a board game called Cashflow. You start in a typical nine-to-five job and embark on a journey to build up assets like property, stocks, businesses, and precious metals so you can get out of the rat race and start building wealth. By playing Cashflow as a family, the Taylors were able to learn valuable lessons and gain insights into personal finance and investing, including how they behave within investing scenarios, without having to put their actual money at risk. (There are versions of this game for adults and for kids.)
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Family Discussion Entrepreneurship |
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Before your child embarks on her entrepreneurial journey, help her think it through: • Will I need equipment or materials, and how will I pay for them? • If I need to borrow money for start-up capital, how will I pay it back? |
Some service businesses, like babysitting or tutoring, don’t require much from your preteen in the way of start-up capital. Everything they earn is pure profit. Others, like mowing lawns or shovelling snow, may require an upfront investment in equipment. Businesses that involve buying inventory and reselling it, like the proverbial lemonade stand, also require an upfront investment in materials.
Key Points
• Between the ages of nine and twelve, your kids’ understanding of the world is deeper than it was at younger ages. You can help them deepen their understanding of how money works too.
• The money habits that kids form in these years can be the foundation for how they relate to money when they’re much older. Help them develop habits that are based on conscious decisions, not impulsive reactions.
• At this stage of their lives, kids are better able to grasp the rationale behind budgeting and to become increasingly accountable for how well they stick to their budget.
• As with younger kids, there are plenty of moments in everyday life that lend themselves to conversations about money when your kids are this age. But they’re also old enough to benefit from more formal direction — for instance, going to the bank with you to set up their own savings account.