Kids today gain levels of sophistication and tech savviness at earlier ages than ever before. But this is a complex world and, more than ever, parents have a key role in making sure their children are equipped to deal with every complexity – and developing strong money management skills should be among the most important for helping your kids achieve their life goals, lead a better life and help others.
New research reveals that Canadian parents are very proactive when it comes to teaching their children about personal finance – with 82% of parents frequently or sometimes having conversations with their kids about good money habits. It’s important to start dollars and sense talks early so here are some age-related tips to get you going.
6-12 years Start with a ‘fun’ bank they can fill with coins; eventually graduate to a ‘real’ bank account and an allowance tied to certain tasks to learn responsibility. A fixed amount allowance is best because it teaches that there are serious choices to be made about spending and saving. Deposit at least 10% of their allowance in a bank account and explain how interest makes their money grow. Board games like Monopoly and interactive websites such as the Canadian Foundation for Economic Education are also great money education tools.
12-16 years Develop a simple budget that includes keeping tax receipts and statements to keep track of their money. A charitable giving component will show them how their money can have a positive impact on the community. Give an allowance ‘bonus’ for special work with the requirement that the extra money must be invested. Introduce the concepts of ‘compounding’ and tax-saving through such long-term investments as a RRSP eligible investment.
16-18 years Have each child file a tax return as soon as they have a job that results in a T4.
It’ll give them a more ‘personal view” of taxes and build up future contribution RRSP room. Co-sign for a low-limit credit card and carefully monitor its use. Stress the importance of making monthly credit card payments to maintain a good credit rating and avoid high interest rates or late fees. Use credit card statements to discuss spending patterns and best use of purchasing power.
* Involve you kids in family financial discussions.
* Show how your family budget must balance expenses and income.
* You can even start playing ‘money games’ with your kids as young as two years old.
Teaching kids about money will help them develop their own feelings and values towards positive habits such as saving and spending. Not sure where to start? Feel free to contact your financial professional for some ideas.
Mike Ouellette is an enthusiastic financial consultant, with his prime focus being young families who are interested in learning about planning for their financial future. If you have any questions or are interested in learning how to begin planning for the future of your family, he’d welcome your questions regarding Registered Education Savings Plans, Mortgages, Retirement Planning, Income Protection, or any other financial worry you’d like to have addressed.