By Sheila Walkington, Co-Founder and CFO of Money Coaches Canada
Money lessons start at home. Children and lots of young adults learn by watching and imitating their grownups. Just like teenage driving lessons, it’s all too easy to absorb mom and dad’s bad habits when it comes to money management. When polled, 75.9% of young people cite their parents as being a major influence on their money habits. Better to inherit the family nose than less than stellar financial values. Luckily there are plenty of age-appropriate money conversations parents can have with their children. Here are some practical ways to get money conversations rolling.
Bite the bullet and start talking about money
Many of us learned that discussing money is impolite, and that can be a wall when it comes time to teach kids about financial literacy. Just once or twice a week is enough to do the trick. Opening the lines of communication when children are young by showing them how you pay bills online, explaining the correlation between the hydro bill and a warm home in the winter or giving them an allowance to manage, goes a long way towards keeping a healthy dialogue open as they get older.
Pass the torch
Starting children off with an allowance at a young age is one of the most practical ways to teach money management. Kids learn by doing. Making decisions with their own money reshapes priorities, delays gratification, and sets kids up to confidently make these choices. For some kids it can be tough to save up money for something special in the future because it seems so far away. But this is a wonderful opportunity for children to plan long term and really think about what they want to spend their money on. They won’t always get it right, and that’s ok. It’s better to make these mistakes early on rather than when the stakes are much higher.
Family financial planning
Today’s families are busier than ever, and juggling finances like budgeting, RSPs, TFSAs, saving for the future, and debt load are decisions that must be made. When children are old enough, involving them in discussions about saving for a vacation or new car, and the family financial goals can be valuable building blocks for their financial education. Engaging them in the decisions that affect the household helps kids understand how foregoing pizza night is necessary to ensure savings goals are met so the family can go to Disneyland for spring break.
Teach a healthy respect for credit cards
To a child, credit cards seem magical: you swipe a strip of plastic and get to take a purchase home from the store. No money required! Credit cards can be a useful tool for collecting points and rewards, but can become a problem if someone is unsure how to handle them. Proper management of a credit card includes not charging anything to a card that can’t be paid off at month’s end. Teaching young people how to manage a credit card by paying off each monthly balance is one of the most important lessons parents can teach their children to set them up for future financial success.
The kids are alright
Making a concerted effort to teach children age-appropriate, practical lessons about money sets them up for a bright and independent financial future. Talking about money is like a muscle, you’ve gotta work it out to build strength. Life comes at you fast (pandemic, anyone?), and being prepared is the best insurance to mitigate financial disaster. Weekly money chats and addressing the basics is a powerful way to set young people up for a lifetime of productive financial choices to get them further in life.
Got questions? Need help? Talk with a Money Coach today.