Peer pressure can directly influence how much it will cost to raise your children. Teach them how to develop good stewardship now, so monetary responsibility becomes a part of their character development. By not providing your child with financial guidance—and the discipline necessary to sidestep financial pitfalls of overspending—you may encourage a spendthrift who spends right up to his or her last dollar during college years or beyond. Teach fiscal management early.

Teach them by giving them an allowance.

Parents often offer children an allowance before they’re old enough to get part-time jobs. It helps them to get used to handling money. Running a family household is akin to running an equitable business partnership, so children can responsibly perform chores around the house and yard to earn their allowance. Operating a real family business also offers children job opportunities. If you run an actual business, pay your children and deduct the expense, and they’ll accumulate RRSP contribution room. Any work you can hire others to do, such as preparing mail, answering the phone, or shovelling snow could warrant an allowance.

Save a portion versus spending it all.

Express the importance of saving some of their allowance or income from a part-time job. If they work in the household, negotiate raises with them if asked for, as this will teach a valuable lesson when in the workplace later. Ask questions like “What are your expenditures per week?” and teach children/youth to write out a budgeted list. Don’t let their peers’ allowances influence what you will give. Open a savings account for preteens; a wallet and piggy bank for the younger ones.

Make saving a condition for the allowance.

Ask, “What amount of your allowance are you saving?” Count money with the children so they can see the value of managing it, and relate their savings to necessary expense goals. Some banks such as TD Canada Trust have counting machines in some of their branches. Take your children in and let them see how the coins add up to sizeable savings over time. You are given the slip of paper with the dollar figure of the coins to deposit into the children’s savings accounts.

Reward their progress.

Show approval when they save. Teach them to make a shopping list. Involve children in developing the household shopping list for groceries or other items, and then have them accompany you to the store so they can see you stick to your budgeted purchasing. By watching you, they will learn to avoid impulse buying. Get them involved in comparing value, visiting various stores, while assessing products and warranties.

Advise your youth about the pros and cons of credit.

If your child applies for a school loan, beware that a credit card offer may be next. School expenses are high enough without adding the interest and principal payments of a credit card—especially if spending gets out of control. Tell your children before college or university that plastic spending can ruin a person’s educational opportunities and financial credit. Teach them that money going out must not exceed income.

Admonish them by pointing out mistakes.

Talk to them about the terrible United States housing mortgage credit crisis of 2008—what happened when people borrowed so much money that it became impossible to pay back month by month. Bring out the interest tables—do some loan calculations on a software package like Quicken and show them how compounding interest can become a burdensome drain on income. Explain how credit ratings can be lost if credit is abused or bills are not paid on time.

Start them investing.

Once you get past teaching them about the drastic plastic trap, teach them to invest a portion of their first job’s pay (just like saving a portion of their allowance). Point them to money market fund purchases using dollar cost averaging on a per pay basis. When your child begins making a good income, refer him or her to a good investment advisor.

Teach them philanthropy.

When children help others, they will learn to become stewards of life’s resources. Giving to the poor via agencies like World Vision instils a selfless viewpoint that goes hand in hand with building the inner discipline necessary to manage personal finances.

Distinguish their wants versus needs.

Guide children to distinguish between a “want” and a “need” by teaching the needs of people in poverty-stricken countries. Let them view videos (available online) about aid programs so that they can catch a glimpse of the poorer third-world countries. Subtle changes of thinking can help one avoid getting into the trap of asking “Can I afford it?” about items that are not needed. Better to teach children to ask “Can I do without this item?” Have everyone in the family contribute to help fund a special project.

Consider thrift stores such as Value Village

Brand name clothing, often like new can be purchased for 10-20% of the new price-tag. This teaches them that money saved can be invested.