12/12/2018 0 Comments
Teach Your Kids These Key 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.
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, spending and some begin earning, whether through chores or other paid work, including part-time jobs. By the time your teen transitions into young adulthood, he or she should be able to make a plan for financial independence. Once post-secondary school is done, your son or daughter will want to get a job, a vehicle, and his or her own place to call home.
You can contribute to your child’s financial success by providing the learning foundation. Start anytime it seems appropriate with a discussion of the key financial concepts below.
Saving for later is a critical habit. Saving can start very early in a child’s life, including with a piggy bank. 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 for interest to be earned, and can provide a buffer against future expenses.
When opening the account with your child, determine together the account’s purpose. Is the account simply to save or also to make purchases? Do you want your child to have a debit card and be able to access the account online? Discuss privacy with your child, including the importance of keeping the password private and what to do if a debit card is lost or stolen. Also discuss post-secondary tuition fees and future vehicle as potential major goals.
Perhaps as critical as saving, good money management entails learning how to spend wisely, keeping in mind opportunity costs. Teach your child how to distinguish between ‘needs’ and ‘wants’ and to evaluate each potential purchase this way. Discuss how money saved today might be better spent on other opportunities in future. Also talk to your child about how trends change and how marketers try convince consumers that the latest clothes, shoes or games are ‘necessary’ to fit in and be accepted by peers.
Go to the shopping mall together with your child only with a purpose, to avoid getting side tracked with unexpected impulse buys. Be sure to try on or try out an item at the store before purchasing it and consider looking elsewhere before making a decision, including online. Discuss how to compare value between items, services and stores. If your child is fixed on a particular item, inquire if there are other purchases he or she is willing to give up in order 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 give your child the opportunity to practice independent budgeting within that allowance. Suggest that your child give charitably as well. Recommend gently used items instead of always buying new. Also suggest a part-time job if your son or daughter is set on designer brands.
Earning is key part of learning money management. It is a thrill for most kids to get their first job and a good opportunity for them 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 also available at the Alberta Learning Information Service, LinkedIn, and many job websites, which will be of greater value as your son or daughter matures.
Teach your young adult to network with peers, teachers, coaches, and community organizations to expand his or her horizons and be open to various jobs. While most advertised jobs are listed online, a high volume of jobs are still not advertised and come from referrals and word of mouth.
Budgeting is an excellent way to help your teen prioritize and start making choices about how to save and spend money. It is valuable to make even a basic spread sheet of how much your teen has saved and what it costs to buy desired goods and services, spread out monthly. Maintaining a spread sheet of money coming in and out each month can help your teen to consciously track expenses and make better spending choices.
The purpose of borrowing 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 getting set up with a credit card, vehicle lease or loan or a student loan. When the borrowing starts, it is critical to track dates and amounts for payments due. Direct withdrawals from a bank account are recommended, along with monthly calendar e-reminders about bills. Missing a payment can mean late charges, interest and a negative impact on your young adult’s credit rating. Encourage your son or daughter to stay on top of payments due, make payments early whenever possible and seek credit counselling if there is need.
Insurance is often learned about through various life stages, but it can be discussed any time as a contract which provides a payment in the event that an insured loss occurs. Auto insurance tends to be the first insurance young adults buy, in order to drive a vehicle. Health insurance benefits from a job are typically obtained next. Tenant and home insurance policies are taken out as they are required by a landlord or lender. As your young adult matures, he or she will learn more about everyday risks and types of insurance needed.
Contact Fox Miles & Associates Inc. for Debt Solutions in Edmonton
It is wise to take steps now to discuss money matters with your son or daughter, and put a viable plan in place. With open communication, you can instill the lifelong lessons in money management we wish for our children.
A Licensed Insolvency Trustee in Edmonton at Fox Miles & Associates can help you tackle management of your own money and debt. We can assess your situation and help set up an effective budget and solid debt repayment plan as part of your own 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.