Although understanding money is critical to the prosperity and well‐being of Canadians, many feel it is not something you talk about even with your family. Financial literacy is more than a nice‐to‐have skill; in fact it may be as important as reading and writing. Just ask any young adult fresh from school with no understanding of money and how things work. Many have ended up in financial difficulty because they just didn’t know better. Schools do teach as part of a grade 10 course a little bit about finances; but we know how much kids remember or pay attention to something like that!
Teach your children
Start teaching your children financial literacy when they are young and it will be second nature to them when they have to face the world alone. As parents we want our children to be successful and financial literacy is something that will benefit them for life. Keep it simple and teach them the three S’s of financial management: spending, saving and sharing. Urge them divide their allowance or gifts into these three categories:
- Spending is for whatever they want or need today.
- Saving is for future needs and wants or larger items – children should be encouraged to put money into a piggy bank, bank account or their RESP, and
- Sharing goes to those in need like charities or church.
When they are really little you can do this with three piggy banks so they can see how it works. Then, teach them the difference between needs and wants using instances from your everyday life. Important too, is to lead by example, include them in some easier financial conversations so they can see how you apply the principles you are teaching them. As they get older, you can include them in more complicated situations, so their knowledge grows. Also, explain that their needs and wants will change as they get older. Teenagers have far different needs and wants than a nine year old, so keep it age appropriate and make it fun and interactive. Get their opinion and let them know why it would be a good or not so good idea.
Set goals with them
An important part of financial literacy is goal setting, if you take the time to teach them this skill they may not get into so much trouble when they get their first credit card! The next time they ask for a new item even if it is a need, help them set a goal and save for it.
Share your values
Finally, share your own values discussing how you save, invest and protect your assets. Explain the importance of paying off debt responsibly. Keep it simple, but make sure they know. It could be one of the best things you ever do for your children. And don’t be afraid to include your advisor she/he will be happy to spend some time with your children helping them learn about using money wisely.