Money Education – Things Your Children May Not Learn In School

It doesn’t cost much, except time – but neglecting it could be costly for your kids. That would be teaching them age-appropriate money management skills they may not learn in school. A dollars and sense education will help them achieve their life goals, lead a better life and help others.

Here are some age-related toonie tutorials to get you started.

6 – 12 years

Give your youngsters a ‘fun’ bank to fill with coins from you and others. Let them graduate to a ‘real’ bank account and an allowance clearly tied to the completion of certain tasks. A fixed amount allowance is best because it teaches that there are serious choices to be made about when to spend and when to save. Encourage them to deposit at least ten percent of their allowance in a bank account. Explain how interest makes their money grow. Board games like Monopoly or interactive websites such as the Bank of Canada’s (www.bankofcanada.ca) and the Canadian Foundation for Economic Education (www.moneyandyouth.cfee.org) are also good money education tools.

12 – 16 years

Help your children develop a simple budget plan that includes keeping their tax receipts and statements so they can keep track of where their money went. A charitable giving component will show them how their money can have a positive impact in the community. Give an allowance ‘bonus’ for special work with the requirement that this extra money must be invested. Introduce them to the concepts of ‘compounding’ and tax-saving through such long-term investments as a Registered Retirement Savings Plan (RRSP).

Use shopping trips to discuss debit and credit including the fact that most credit cards carry much higher interest rates than other forms of borrowing, such as a personal loan.

16 – 18 years

Have each child file a tax return as soon as they have a job that results in a T4. They’ll get a more ‘personal’ view of income taxes and build up room for future contributions to an RRSP. Co-sign for a credit card in their name with a low limit. Carefully monitor its use and stress the importance of making their monthly card payments to maintain a good credit rating and avoid high interest rates or late fees. Use monthly credit card statements to discuss their spending patterns and best uses of their purchasing power.

Involve your children in your family finances and discuss how your family budget must balance expenses and income. Introduce them to savings and investment products -- stocks, bonds, Guaranteed Investment Certificates, registered and non-registered savings plans -- the role of insurance, and investment concepts like portfolio diversification and risk/reward decisions.

It’s smart to talk money with your children and if you need help, give your professional advisor a call. A professional perspective can add welcome weight to your toonie tutorials.