As a child, how many times did you talk with your parents about money or personal finances? Once? Twice? If you can count the number of times on one hand, then you're not alone.
A recent poll by Ipsos Reid shows only one-third of Canadian youth, ages 10 to 17, regularly talk with their parents about money and finances. The study also showed that money has become one of the least discussed issues between parents and their children.
"Many youth now see debt as a way of life," says Michael Voros, manager at Envision Financial's Tsawwassen branch. "They've grown up without really understanding personal finances and quickly get into debt after high school, which can have farreaching consequences in life."
A father of three schoolaged children, Voros says it doesn't have to be this way.
"Teaching children how to handle money at an early age is the best way to set them up for success as adults," says Voros. "As parents this may seem daunting, but preparing children for a solid financial future is as simple as remembering your ABC's."
A is for allowances "Allowances are a valuable tool for teaching children about personal finance and good money management," says Voros. "Saving, decision-making, planning, sharing, responsibility and charity are all lessons that can be taught through an allowance. It doesn't have to be a lot of money - as little as $1 a week per year of age is sufficient to offer lessons about financial management."
Voros also suggests that an allowance should not be viewed as an entitlement - it should be something a child earns for contributing to the household.
If a child needs some extra money to make a purchase, they can do extra chores to earn those funds. That way, an allowance is not only used as a tool to teach children how to manage money, it also teaches children the connection between work and money.
B is for budgeting "Children should be introduced to budgeting at an early age," says Voros. "A popular way to do this is with a system of jars where children portion their allowance for savings, spending and charity. Any money the child receives, including birthday and other gifts, should be divided among these jars. In this way children can save up for a favourite toy or treat. But remember, if they don't budget appropriately, don't bail them out by giving them the money - use it as an opportunity to discuss the importance of budgeting effectively."
C is for compound interest - and candy "When it comes to saving for the future, your child's main advantage is their age," says Voros. "Some of the savings your child collects each month can be placed into a savings vehicle, like a high-interest savings account, then when they graduate this money will have grown exponentially through compound interest.
"Finally, your child's financial education should include some fun," adds Voros. "A certain portion of a child's allowance should be open for discretionary spending - likely on candy if they are my children. Giving some leeway when it comes to their allowance not only builds some fun into the process, but also offers children a sense of responsibility and trust that they rarely get anywhere else."
