Canadians are still divided on the great supplements debate. According to a recent survey by Mydoh, a youth money management app owned by RBC, nearly half of Canadian parents give their children a check-in, while the other half choose not to. The survey also found that many parents are unsure whether they are using the aids effectively.
While there isn’t necessarily a one-size-fits-all approach for all plugins, Yahoo Finance Canada spoke to two financial experts about some of the best practices to follow.
Realizing that cost can be a significant barrier, the first question parents should ask themselves is whether they can afford to give their children some help, says Jessica Moorhouse, an accredited financial adviser with in Toronto. If the answer is yes, she says they can be a “wonderful financial teaching tool.”
“What I hear most often from adults is: “I never learned [about money] at school, I never talked about it with my parents. So once I started earning, I made a bunch of really expensive mistakes,’ Moorhouse said Yahoo Finance Canada. “It’s really about teaching your kids how to manage money now so they can take those lessons into their adulthood.”
Moorhouse says an allowance is essentially the same system children will experience when they earn income as adults. And they will need to manage their money in a similar way, such as setting savings goals for certain purchases.
So why not start them young?
“If you can break those habits … it’s not going to be a big learning curve when you’re making more money and things are a little more complex with your finances,” Moorhouse said.
The ABCs of Supplements
Moorhouse has three pointers for parents who want to give their children a helping hand. She calls them the ABCs: autonomy, acquisition, and sustainability.
Although the Mydoh report found that nearly eight in 10 Canadian parents believe children should be required to save some of their allowance, Moorhouse says that approach could “fail.”
Her advice? Give them some autonomy and let them make mistakes, because that’s one of the best ways to learn.
At the same time, she says some education should be involved.
Robin Taub, a Toronto-based CPA who wrote a book on financial education for young people called The wisest investment, recommends teaching children how they can divide their allowance between saving, spending, sharing and investing.
“A young kid is going to need some guidance,” Taub said in an interview with Yahoo Finance Canada. “Once they’re teenagers… you’ll be a little further away. Because they are capable of making their own decisions and you want them to live with the consequences of their choices and learn that money is a limited resource.”
Next, Moorhouse says it’s helpful to involve children in setting compensation parameters to ensure buy-in and avoid any confusion. Some of the topics to discuss include whether or not compensation should be tied to housework and who is responsible for buying what.
“Really make sure they feel like they’re part of the equation and not just being told what to do,” she said.
Finally, Moorhouse emphasizes the importance of sustainability. Failing to give your child an allowance once it’s agreed can create mistrust and lead to a complicated relationship with money, she notes. Similarly, she strongly advises against holding a compensation as a form of discipline, noting how similar tactics are used in toxic romantic relationships.
“We don’t want to bring that into the equation,” Moorhouse said. “Either they will just rebel against money in different ways, or they may be attracted to a partner who has some of these behaviors that are distinct from their past.”
How much should you give your children?
On average, Canadian parents start giving a helping hand when their children are between nine and 11 years old, according to the Mydoh report. But Taub says most kids will be ready around age five, when, for example, they might want to buy something from the store.
“It’s good for them to have some of their own money and start getting used to the fact that money doesn’t come out of a hole in the wall,” she said.
She suggests starting with small amounts.
The rule of thumb is to provide anywhere from 50 cents to $1 a week for each year of your child’s age, she notes. So a seven-year-old can get $7 a week.
“With inflation now, you’re probably giving them $10 a week,” Taub joked.
Ultimately, she says, it’s a personal decision based on what families can afford. With young children, Taub recommends starting with a cash allowance and using a multi-slot piggy bank before switching to a digital system when they’re old enough to understand the concept.
Farhan Devji is a freelance journalist and published author based in Vancouver. You can follow him on Twitter @farhandevji.
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