Would you raid your kids’ piggybank?

Moms and dads can’t wait for their kids to start talking, but when the never-ending stream of awkward questions begins, some probably wish their little ones had never learned to string the words ‘how’ and ‘come’ together. But while parents tend to expect those nail-biting questions about the birds and the bees, they’re often completely blindsided by questions about what seems, on the surface, to be a less sticky subject: money. According to a poll conducted by TD Canada Trust in December, 42 percent of parents with young kids say they haven’t even broached the subject yet. Why? Over a third said it was just too challenging to find the time to delve into such a complicated - and often very subjective - issue. Big mistake.

Most parents wouldn’t dream of letting their kids reach adulthood without learning to read, write and even ride a bicycle, yet many parents leave financial education up to chance. This means that kids are left to patch together the messages they get from the media, those they hear from others and the behaviour their parents communicate every day, without even saying a word.

[More: Money smarts for kids – from getting an allowance to investing]

Maybe you’re great at managing your money; maybe you still have a lot to learn. Either way, broaching the subject with your kids can help them to develop better financial habits, a key component to living a happy, healthy, and productive life.

We talked to Shawnnette Fraser, manager of customer experience at TD Canada Trust, about some of the tough questions kids ask about money and how parents can address them.  Here’s her expert take…

Kid Question: You have money  - why can’t you just buy me what I want?

Think back (perhaps way back) to when you were, say, six years old. Perhaps you saw your mother writing a check to pay for groceries, or watched your father peel off a few bills for your allowance. It probably became pretty clear to you at a young age that your parents were the ones with the money. They had it, you didn’t. And that’s about all most of us really knew.

[More: How to teach your kids about debt]

Why, for example, was there money for groceries, but not a new toy? Why was there sometimes lots of money, when at other times there seemed to be none at all? Why could you have a new toy later, but not now?

Fraser says the best way to address these kinds of questions is through everyday teachable moments, which will help children gradually pick up on how the world of money really works – and help them learn that money doesn’t flow from some bottomless pit. Fraser said it should also involve taking your children with you when you run errands, go to the bank or go shopping.

“Even the busiest parents can find teachable moments every day and try to lead by example. “One key lesson of financing and budgeting is patience. Try taking your kids to the bank, so they can see you saving rather than shopping,” Fraser said.

Through everyday actions like these, you can show your children that even parents can’t buy all the things they want. If kids learn even that one lesson at a young age, they’ll be well on their way to understanding personal finance.

[More: Kids with coin: Start teaching your kids financial responsibility now]

Kid Question: My friends don’t have to do anything to get their allowance, why do I?

Fraser says that if parents choose to give kids an allowance, it’s a good idea to tie it to completing chores.

“The lesson here is that money is earned, not given,” Fraser said.

The key is that kids shouldn’t get used to the idea of handouts (which, let’s face it, are woefully absent in adult life), and should understand the connection between work and pay. Janet Bodnar, personal finance editor for Kiplinger, recently wrote that this should also extend to eventually having kids use their allowance to take over some financial responsibilities from their parents, such as buying their own video games or paying their own cellphone bill.

Kid Question: How can I save up enough money for that?

Teaching your kids to save up for something they really want is a valuable lesson – and a skill that many adults struggle to master. The problem is that especially for young children, patience can be hard to come by. Combine that with some underdeveloped math skills and turning $5 into $50 can seem utterly impossible. This is where parents can help to provide the structure and motivation kids need.

“Parents can get creative by posting a chart on the fridge and helping their kids track their goal,” Fraser said.

This takes a lot more time and effort than just laying out that $50 yourself, but experiencing delayed gratification – and a feeling of accomplishment – is a priceless lesson in personal finance.

[More: When your kids want everything: How to teach them the financial truth]

Kid Question: Why do I have to give my piggybank to the bank?

Fraser says that parents can open a bank account for their children at any time, but it’s a good idea to start a piggybank for very young kids, who are unlikely to be able to fully understand funds they can’t see or touch.

“Once they’re a little older, it’s time to take that piggybank to the bank. By six or seven, they’re old enough to go online and see their money growing and be involved in adding to it,” Fraser said.

But Fraser says that even younger children should have some exposure to banking.

“Take them to the bank with you, so that they see it as a positive experience and feel comfortable in that environment,” Fraser said.

Kid Question: But why don’t you do that?

Kids – especially young kids – have a sharp sense of perception.  If you teach them one thing and then do another, they will notice. In fact, they’ll probably even call you on it...in the most public place possible.

As it turns out, parents aren’t always the best role models. In fact, a whopping 31 percent of respondents in the TD poll said they were guilty of raiding their children’s piggybanks on occasion (are you one of them?!).

And while it’s really cute when your kids imitate the way you read the paper or hold the phone, it’s a lot less adorable when they pick up your bad habits. So, improving your own financial behaviour is a big part of helping your kids learn to manage their money responsibly. This means parents need to work on not only being open and honest about money, but also being accountable for their own financial decisions.

“It’s not just what you say, it’s what they see you doing,” Fraser said. “Take them to the grocery store and explain your budget, and why you’re buying things on sale. Show your kids that you’re willing to wait and save up for things you want. It’s about leading by example and balancing their perception of how the world of personal finance works” Fraser said.

Oh, and if you do dip into their piggybanks, you’d better pay it back – with interest. After all, that’s another great lesson in how money really works.

GoldenGirlFinance.com is a free personal finance and education site for women.

Nothing contained herein is intended to provide personalized financial, legal or tax advice. Before implementing any financial strategy, you should obtain information and advice from your financial, legal and/or tax advisers who are fully aware of your individual circumstances.

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