For many Canadian families, the holidays are associated with financial stress, especially when the bills inevitably roll in with the New Year.
According to Tanya Wilson, an investment advisor at Envision Financial, parents who spend first and think later, may want to reconsider that strategy 鈥� their children are watching.
鈥淎 recent survey found that only a third of Canadians between the ages of 10 and 17 have regular talks with their parents about money and finances and approximately 30 per cent feel that their parents have financial problems,鈥� Wilson said.
鈥淐hildren are very aware of their parents鈥� actions and are likely to repeat their parents鈥� spending habits. By talking to your children about your finances and setting a good example, you can help set them up for future financial success.鈥�
Let your kids in on the secret
Recent research has shown that 34 per cent of children think there are financial secrets in their home. Wilson cautions that this is not a good place to start. 鈥淚t can seem uncomfortable for some to let children in on their financial situation, but it鈥檚 so important. When my clients鈥� children enter their mid-teens, I encourage them to bring their kids into our financial planning meetings. Then they can learn how their parents spend and save their money 鈥� it鈥檚 usually very eye opening!鈥�
Teach them the importance of budgeting
鈥淚n my meetings with clients, budgeting and cash flow management are some of the areas we review,鈥� says Wilson. 鈥淎t the end of the meeting, I provide my clients鈥� children with a budget worksheet and show them how to create their own budget. The average teenager spends $100 a week and it鈥檚 good for them to understand where that money is going and that if they spend wisely, they can save money for the future.鈥�
Educate them on the importance of compounding
鈥淐ompounding is a simple concept, but one that many people fail to capitalize on,鈥� continues Wilson. 鈥淲hen my clients bring their children in, I talk to them about the importance of starting to save early versus later in life. When I show them the difference they鈥檇 have to save monthly for retirement if they started saving now compared to starting to save at age 45, they鈥檙e usually quite surprised. RESPs are also a great illustration. When I set up RESPs for my clients鈥� kids and they can see the 20 per cent match and watch their savings grow, it鈥檚 very empowering.鈥�
Let them earn their money
鈥淪ome kids view allowance as an entitlement, but I see a lot more success when the family is viewed as a household and an allowance is something you earn for contributing to that household,鈥� says Wilson. 鈥淚nstead of asking parents for money when they want to purchase something, children can do extra chores to earn that money. It really teaches children the connection between work and money.鈥�
Give the gift of financial literacy
When thinking about stocking stuffers for your children, Wilson suggests considering a book on financial literacy written for children.
鈥淭here are some great books out there like 鈥楾he Secret Life of Money 鈥� A Kid鈥檚 Guide to Cash鈥� by Kira Vermond and 鈥楾he Complete Guide to Personal Finance: For Teenagers鈥� by Tamsen Butler.
When you think about it, giving your children the knowledge and understanding to make sound financial choices in life is one of the best gifts you can give.鈥�
