Raising money smart kids
By Medicine Hat News on July 21, 2018.
Whether it’s teaching them the value of a dollar or helping their future financial independence, many parents strive to teach their children how to make sound financial decisions. It’s never too late or too early to introduce positive spending, saving and borrowing habits that can help ensure a lifetime of financial confidence.
Your involvement is key to starting your child on the right path to financial literacy. As early as age six, children can understand the basic principles of saving and spending, including the value of saving first, or for longer-term goals. Many experts recommend a “save-spend-share” concept. This means that whenever children receive money, they put some aside for savings and charitable donations, and can spend the rest as they like. Opening a high-interest savings account can also help introduce bigger kids to budgeting, investing and borrowing. Childhood is also an ideal time to instill a lifetime desire to give back. Consider talking to your children about causes they might like to support and incorporating their ideas into how your family gives back.
Whether they’re planning for university, moving out, or starting a new career, money plays an important role as your children start the journey of “making it on their own.” Post-high school is a great opportunity to create a first “real” budget with your child. Encourage them to track spending, and list income sources and projected expenses. Adding these numbers up can help determine whether they’ll run short or have a surplus.
If they’re running short, they might want to look hard at “wants versus needs” or ways of increasing their income. If they have a surplus, introduce the idea of contributing to a Tax-Free Savings Account or Registered Retirement Savings Plan if they have been working and earning RRSP room.
Young adults are often presented with easy access to credit. Teach them to be aware of anything that sounds too good to be true, stick to their budget and borrow only what they can afford to repay. Adult children eventually enter a world where they need to balance their financial goals, such as owning a home, with basic living expenses or the costs of raising children. This is an ideal time to pass on your own financial experiences, including the challenges you overcame to build wealth.
While informal family conversations and real-world learning are essential components of financial education, it can make sense to introduce your children to your financial, legal and tax advisors, who can help provide guidance that might be difficult for you to convey. Your trusted advisors can also provide education in many areas, or assist with getting your children’s affairs in order.
A. Craig Elder, CFP, FMA, CIM, FSCI is Branch Manager with RBC Wealth Management Dominion Securities Inc. in Medicine Hat. Source material provided by RBC Wealth Management Services. Advisors are insurance licensed under RBC Wealth Management Financial Services Inc., a subsidiary of RBC Dominion Securities and is part of the RBC Financial Group, member CIPF. For more information on this and other financial strategies, contact an RBC Dominion Securities Advisor 403-504-2700.
