The Keys to Raising Financially Savvy Children

money jar

If you asked any parent these days what about raising children is keeping them awake at night, it could be several things. One of the top three concerns for sure would be how kids today have no appreciation for money.  Kids these days don’t really understand the concept of money. Why would they? Parents today are basically glorified ATM machines in the eyes of their children.

Most parents we talk to are overwhelmed with the expense of raising children. Not only are the basic needs draining the bank account, but the consistent wants of the children are financially exhausting.  The keeping up with the Jones’s – teen edition – is on full stage these days with the need to fit in and the social media barrage of advertisements.

Most parents themselves are not very strong on financial management and we sometimes look to the school system to help, but that isn’t happening.  The school system has really missed a great opportunity to make a difference in their curriculum that could be taught to a spend first, save second.

The education system hasn’t kept up with the social changes in the world we live in and unfortunately some courses that continue to be taught could be replaced with subjects that are critical to long term success in life, like financial management.   Financial management 101 could be an amazing teach. Helping kids understand budgets, paying bills and debts on time is incredibly valuable. Understanding the cost of taking on credit and avoiding the impulse of the wants in life is a must know for young adults.

According to a recent report, the major banks in Canada currently make $85 million a day and of that $79 million comes from their debt business. That’s 93% of banks’ profits are from selling their customers debt products.

Learning about money starts as early as age seven or eight but teens and twenty somethings are where most of the learning must be taught.  This new generation of millennials will be starting out behind the financial eight ball when it comes to the job market. Currently there is 12 million millennials competing for work. The unemployment rate of millennials is running at 17% nationally, they are loaded with school debt and they are in a competitive job market.

Teens and millennials are traditionally spendoholics.  When you breakdown where they spend their money it shakes out something like this: 21% on clothes, 18% on fast food, 10% on personal care, 9% on shoes and 8% on electronic gadgets.

So, what are parents to do?

  1. Talk to your kids about how hard money is to make. Show them how many deductions are taken off the total amount and how you have to budget the remaining money until the next pay day.
  2. Give your kids an allowance. An allowance is not designed to be a reward. An allowance is designed so that the kids learn how to manage money. Have the kids divide the allowance into a “Save Account”, a “Spend Account” and a “Give Account”. This will help them learn about budgeting each time they get paid. Once the Save jar has a substantial amount open a bank account for safe keeping.
  3. Let them make decisions on how to spend. Next time they ask for something or need something, give them a budget. Say to them, “if you spend more than the budget dictates, then you can use your money to make up the difference, but if you spend less than the budget, the savings you can keep”. This will teach them to be careful and shop around for the best deals.

It’s important for parents to teach their children some financial management. You owe it to your kids to make them aware of the expensive financial world we live in.  It’s becoming more and more difficult to live in a world of instant wants and needs. If the school system is not able to teach our kids about financial management then as parents we need to ensure kids receive that lesson.

David is with St. Catharines financial firm Capital Wealth Management. He specializes in providing comprehensive financial advice to business owners entrepreneurs and the individual investor. 

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