Teach Your Kids These 6 Life-Changing Financial Concepts

We all would like our children to grow up to be financially independent. We would like to see our grown children earn a good living, spend and borrow wisely, plan well, and have insurance for protection.

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Financial literacy begins in childhood and develops through adulthood. Early learning about finances begins when children start counting, playing with money and playing store. School-age children know about saving and spending; some start earning through chores or other paid work, including part-time jobs. By the time your teen transitions into young adulthood, they should make a plan for financial independence. Once your children finish post-secondary school, they will want to get a job, a vehicle, and a home.

You can contribute to your child’s financial success by providing a learning foundation. Start anytime. It seems appropriate with a discussion of the key economic concepts below.

Saving

Saving for later is a critical habit. Saving, including a piggy bank, can start very early in a child’s life. Once in school, you can take your child to a bank or credit union to set up a student savings account. Explain how savings accounts keep money safe, allow interest to be earned, and provide a buffer against future expenses.

When opening the account with your child, determine the account’s purpose. Is the account to save or also to make purchases? Do you want your child to have a debit card and access the account online? Discuss privacy with your child, including keeping the password private and what to do if a debit card is lost or stolen. Also, discuss post-secondary tuition fees and future vehicles as potential significant goals.

Spending

Perhaps as critical as saving, proper money management entails learning to spend wisely, keeping in mind opportunity costs. Teach your child how to distinguish between ‘needs’ and ‘wants’ and evaluate each potential purchase this way. Discuss how money saved today might be better spent on other opportunities in the future. Also, talk to your child about how trends change and how marketers try to convince consumers that the latest clothes, shoes or games are ‘necessary’ to fit in and be accepted by peers.

Go to the shopping mall with your child only to avoid getting sidetracked by unexpected impulse buys. Be sure to try on or try out an item at the store before purchasing it and consider looking elsewhere before deciding, including online. Discuss how to compare value between items, services and stores. If your child is fixed on a particular topic, inquire if they are willing to give up other purchases to get that item. Also, find out what the store return policy is. Suggest a break away from the mall before making a high-cost decision. In this cooling-off period, your son or daughter may more easily part from the desired item.

Provide a monthly or seasonal allowance for clothing, meals and entertainment to allow your child to practice independent budgeting. Suggest that your child give charitably as well. I recommend gently used items instead of always buying new ones. Also, suggest a part-time job if your son or daughter is set on designer brands.

Earning

Earning is a crucial part of learning money management. It is a thrill for most kids to get their first job and an excellent opportunity to practice the responsibility they have been entrusted with. In addition to promoting working part-time, take your daughter or son to a career fair. Fortunately, career counselling is available in high school, and career services are available at post-secondary institutions. Job search tools are available at the Alberta Learning Information Service, LinkedIn, and many job websites, which will be of higher value as your son or daughter matures.

Teach your young adult to network with peers, teachers, coaches, and community organizations to expand their horizons and be open to various jobs. While most promoted posts are listed online, many jobs are still not advertised and come from referrals and word of mouth.

Planning

Budgeting is an excellent way to help your teen prioritize and start making choices about saving and spending money. It is valuable to make a basic spreadsheet of how much your teen has collected and what it costs to buy desired goods and services, spread out monthly. Maintaining a spreadsheet of money coming in and out each month can help your teen track expenses and consciously make better spending choices.

Borrowing

The purpose of lending is to facilitate achieving a goal that is otherwise not possible while at the same time building a good credit history by paying the money back on time. A young adult’s first experience with borrowing is often when they get set up with a credit card, vehicle lease, or student loan. When the lending starts, it is critical to track dates and payments due. Direct withdrawals from a bank account and monthly calendar e-reminders about bills are recommended. Missing a payment can mean late charges, interest and negatively impact your young adult’s credit rating. Encourage your son or daughter to stay on top of amounts due, make payments early whenever possible and seek credit counselling if needed.

Insurance

Insurance is often learned about through various life stages, but it can be discussed as a contract that provides payment if an insured loss occurs. Auto insurance tends to be the first insurance young adults buy to drive a vehicle. Health insurance benefits from a job area are typically obtained next. Tenant and home insurance policies are taken out as a landlord or lender requires them. As young adults mature, they will learn more about everyday risks and the types of insurance needed.

Contact Fox Miles & Associates Inc. for Debt Solutions in Edmonton

It is wise to take steps to discuss money matters with your son or daughter and put a viable plan in place. You can instill the lifelong lessons in money management we wish for our children with open communication.

A Licensed Insolvency Trustee in Edmonton at Fox Miles & Associates can help you manage your own money and debt. We can assess your situation and help set up a realistic budget and solid debt repayment plan as part of your debt solution. To address your financial needs and concerns, call us today at 780-444-3939 to set up a free consultation. We can offer immediate debt relief in Edmonton.