For kids who see food show up in the refrigerator and gifts magically appear under the Christmas tree, it’s easy to think that money grows on trees. Children don’t always know that everything has a price tag. But being money savvy is an incredibly important life skill, so it’s essential to start teaching kids about being responsible with money early on – the sooner, the better.

While the basics – like identifying money and giving change – are taught in school, it’s often left up to parents to teach kids about money behaviour and values – like saving, spending wisely, and giving to charity. Here are some tips for teaching kids money management and smart spending.

1. Give them some

The best way for kids to learn how to handle money and spend wisely is to give them practice! A time-tested way to do this is by giving them a weekly allowance. When should kids start getting an allowance? When they start to ask for things, suggests Karen Skinulis, parent coach at Parent Talk, so they will have some money to buy the things they ask for.

Make sure you set clear expectations before giving your child an allowance, adds Skinulis. She suggests parents sit down with kids and think about what the child needs the money for and what amount they need so they can actually buy these things. Start out with a small amount for young children, to be used for treats or small toys. As kids get older, think about whether things like electronics, lunch, or clothes should be included, and if a portion of the allowance should be put away for saving or donated to charity.

An allowance is a great tool for both kids and parents. Instead of the child asking Mom or Dad for something, says Skinulis, “the question could then be, do you have enough money saved up to buy that? And if the child does, would you want to spend your allowance to buy it?” This gives kids the opportunity to make their own spending decisions, and parents are able to put a limit on their kids’ spending without being nagged or having to say no.

2. Let them make mistakes

Once kids have some cash, don’t restrict them. Instead, let them make mistakes – and they probably will. “They might spend it too quickly or run out of money,” says Skinulis, “and those are great learning lessons.” They’ll think, “When I spend and it’s gone, I don’t have it for something else. And that’s really the life lessons that we want them to learn: it’s not unlimited,” says Skinulis.

So let them spend their money on candy bars at first. They’ll soon see that if they want that video game, they’re going to have to save up. This will help them learn to delay gratification by saving – an important step in getting kids to really think about their purchases.

3.Take them shopping

Doone Estey, principal at Parenting Network Inc., suggests parents start talking to kids about money in the grocery store, “where kids think you can take whatever you want off the shelves.” Get them involved by having them hold the shopping list or coupons. Teach them how to comparison-shop and find the best value. Ask them for their input on how the grocery budget should be spent.

While grocery shopping is an important activity for kids to understand, be careful when taking kids to the mall. Try to avoid encouraging kids to shop as a ‘just-for-fun’ leisure activity.

4. Model good money behaviour

Skinulis warns parents against buying their kids something every time they’re in a store. “You go into a store with the idea we need something, and just because a child sees something they like, doesn’t mean you buy it for them,” advises Skinulis. Make it clear what you’re going to a store to buy beforehand, and remind them why you’re there.

“I wouldn’t do a lot of impulse shopping in front of them,” adds Skinulis, “because I think it models the idea that I get whatever I see.” Instead, try to show your kids how you make decisions when it comes to money and buying – and this means thinking and researching your purchases before you make them.

5. Help them make a wish list

Once your child has some money, their eyes might be bigger than their piggy bank. Sit down with your child and making a wish list. Then rank the items, encouraging them to research how much each item costs, where they can get it, and how long it will take them to save up for it. This is a great way to help kids learn to make priorities and get them into the habit of planning before they buy something.

Having trouble getting kids to think before they buy without nagging them? Check out Gifting Sense, a free online/mobile survey that asks kids questions to help them learn what to consider before making a purchase – like price including taxes and shipping, and how often the purchase will be used.

6. Ask them to chip in

“Sometimes parents are way too quick to buy things for their kids and not ask the kids to help pay for it out of their allowance,” says Estey. When kids haven’t helped pay for something, they might not appreciate it. And this could lead to a cycle where kids constantly ask for new things that they don’t necessarily take care of.

If an older kid with a clothing allowance needs a new pair of sneakers, Estey gives as an example, a parent might say, “’I’m willing to buy you the $75 sneakers, but I’m not willing to buy you the $100 sneakers, so you need to fill in the difference if you really want these cool [brand-name] sneakers.” This type of exercise teaches kids about the difference between needs and wants, and helps them think about how they want to spend their money.

7. Bring them to the bank

To a child who just sees you taking money out from the ATM, it may seem like the bank just gives out money, says Estey. In order to teach a child about how the banks works, take them to one and open up a bank account for them – most banks have children’s accounts with no fees and no minimum balance. This is an excellent opportunity to talk to them about saving and interest.

Next time they get a cheque for their birthday from Grandma, have them deposit it in their account, says Skinulis. This teaches them how to keep their money safe, not to spend it as soon as they get it, and how to make it grow.

8. Talk about it

One of the most important things to remember when teaching your kids about money is to talk about it – frequently and casually. Let kids know that finances are important but also accessible and not scary.

Estey suggests being as honest as possible when kids have questions about money. You don’t have to go into complete family finances, but you might want to talk about bills, investments, credit cards, or even your retirement fund. If they’re old enough, you could even discuss current events relating to the economy around the dinner table.

For more information about how to teach your kids about money, check out these parenting classes and services in Toronto.

Hilary Roth is a writer, educator and editor who works full-time in marketing and LOVES everything to do with kids. When she’s not stumping people with her amazing riddles or playing mobile games, she can be found reading YA novels and cooking vegetarian food. Follow her on Twitter @hilroth12.

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