Why it’s never too early to learn how to save moneyNov 19, 2015
Across Canada, financial literacy seems to be lacking in schools, where the demise of home economicsclasses has left many young Canadians without a good grip on their finances. It increasingly falls on parents to teach their children about money—which isn’t something that should wait until high school. In Ontario, just 26 per cent of high school students said they were knowledgeable about money. Without any classes to improve their money management skills, they could feel like they’re being thrown off the deep end once they leave home to attend university.
The Financial Consumer Agency of Canada (FCAC) suggests you can start discussing financial concepts with children as young as 4 years old. According to the FCAC, when you teach children about money, they will learn how to:
- · make good decisions about spending now
- · save for the future
- · practice good financial habits that will last a lifetime
- · be financially responsible
The first step is to talk about money when children are around, so they’ll know that it doesn’t grow on trees. With young children, counting and learning how much each coin and bill is worth would be a good start—although that becomes more difficult when everybody pays by debit card nowadays. But one of the most important lessons is teaching children how to save money. You can even give your child a head start on budgeting by getting them to calculate the costs of a family trip to the movies.
One author helping Canadian kids learn about financial literacy is Teresa Cascioli, who has written the M is for Money series for children ages 5 to 9. Just in time for Financial Literacy Month, she has added three new books to the series, teaching kids about pocket change, loans and budgeting. The latest book even includes charts for kids to add and subtract money, basically building their own budget in the process.
Another key step is establishing an allowance. Giving children money of their own gets them into the habit of saving and making good spending decisions. While it’s up to you to decide whether an allowance is earned through household chores or simply given to the child, it’s important to give them the money on the same day every week (or month) so they can get used to having a regular “paycheque” when it comes to saving and budgeting.
And while your children shouldn’t be expected to buy groceries or kick in toward the hydro bill with their allowance, it’s important to teach them the difference between needs and wants so they can learn how to live within their means. This includes setting a good example by not buying things you can’t afford, and explaining what you’re doing to save for an upcoming summer vacation or another family activity. After all, it’s hard to teach the value of setting and sticking to a budget if you don’t practice what you preach!
With November being Financial Literacy Month in Canada, now’s a good time to reflect on your debt and re-evaluate your own spending habits as well. While you’re doing this, be sure to save a seat at the table so your kids can benefit from the experience.
How are you helping your kids learn about financial literacy? Share your thoughts with BDO by joining the conversation on Twitter using #BDOdebthelp #CountMeInCA