How do I teach my kid to save an allowance?

Her besties, who are a year older and permitted to leave the school grounds at lunch hour once a week, have been frequenting a nearby bubble tea shop and picking one up for Matilda, too. Unfortunately, Matilda’s five-dollars-a-week allowance barely covers her bevvy of choice. And, recently she was disappointed to realize she didn’t have much accumulating in her coin purse. It made me wonder if I’m setting a bad example, or at the very least, not giving her the tools she needs to be smarter with her money.

At least I’m not alone. According to a recent survey by Mydoh, a saving and spending app for kids, 54% of Canadian parents feel like their own parents weren’t proactive enough in teaching them about money and budgeting. And another 46% felt they needed to unlearn unhealthy financial habits, like spending more on wants versus needs. (Hello, coffee habit.)

Teaching kids about earning—and spending

Until recently, Matilda’s interactions with money have mostly involved seeing her dad and I spending it. Whether I’m tapping Apple Pay at a clothing store, or he’s swiping a debit card at the gas station, she’s very familiar with the money-going-out concept. Unfortunately, Matilda doesn’t see us contributing to our registered retirement savings plans (RRSPs), discussing how we might afford retirement one day, or setting savings goals for home improvement projects or family holidays.

Not that kids should be privy to all the nitty-gritty details, but we should let her in on more of our financial decision-making. Research shows that kids who grow up with parents who aren’t open about their finances, or who argue about it, tend to have more credit card debt in their college years. And, in one Canadian survey, 15-year-olds who talked to their parents about money at least once a week scored 33 points higher in financial literacy.

Of course, ultimately, kids will need to have money of their own if they’re really going to learn how to make good decisions about it. Like many parents, we are of the thinking that an activity-based allowance system will instill important lessons about earning cash. So, about six months ago, Matilda started earning an allowance.

We have a chore chart on the fridge with a list of tasks to be checked off each day, ranging from making the bed to clearing the dinner table, and she doesn’t get her five bucks at the end of the week unless they’re all ticked off. In this respect, I think we’re doing well. Check! But we haven’t adequately defined what her allowance is really for—a fact that became especially clear when I found myself reluctantly buying Robux (the virtual spending money in Roblox, an online gaming platform for kids). And, until recently, we never discussed all the ways Matilda could think about saving her money, either.

Setting a spending goal

Curbing impulse spending and learning to set larger financial goals is the big ambition here, but getting the hang of delayed gratification is a kicker. (“Why save my allowance when I can have a large mango milk tea, like, today?”Kid, I get it.) Though it can be a difficult lesson to master, it is crucial—and the sooner, the better. I came across a Cambridge University study which showed that several of kids’ key money habits, including delayed gratification, can be set by age seven.

Clearly, it’s time to double down on goal setting. According to many financial experts, short-term goals, like saving for a toy, makes the most sense to kids. So, a few weeks ago, Matilda set a goal of saving for a new book she’s set on reading, the latest in a series she’s been working her way through since last summer. It’s a relatively small purchase, but it’s a big deal to her.

There’s an app for that

Together, Matilda and I shopped around online to find the best price for the book, so she would know exactly how much to save, including tax. Next, we talked about how long it would take for her to reach her goal, depending on how much she put aside each week.

To help Matilda track her savings, we downloaded Mydoh on her tablet and my smartphone. It lets kids learn money basics through gaming features and tracking their earnings. From the parent account, I can send her money, set up tasks associated with her allowance and oversee her goals and spending.

Plus, Mydoh’s new enhanced savings goals feature is super-helpful for focusing on a target—in Matilda’s case, it’s Unlocked, book 8.5 in the hit tween series Keeper of the Lost Cities. Kids can name their goals, set target amounts and choose dates for the goals to be met. Eventually, she can set larger goals, like saving for a special Lego set or a trip to the movie theatre, for example. (Mydoh offers a free 30-day trial. After that, the subscription fee is $2.99 per month, for up to two parents and five kids.)

Matilda has almost reached her first savings goal, and she seems pretty impressed with her dedication. I asked her if she has missed drinking bubble tea with her friends on Wednesday afternoons the past few weeks. She replied: “Kinda, but next week I’ll have enough left over, after I buy my book, to get a small brown sugar milk tea!” She’s done the math and doesn’t feel she has to completely give up those chewy little tapioca balls. I think that’s progress.

Read more about kids and money:

• 6 strategies for teaching kids about money
• Does my kid need a clothing allowance?
• How to invest as a teenager in Canada
• Canada’s $10-a-day daycare program: A guide for families