There are many lessons to be learned in life.
While some are readily available and constantly reinforced, others are not so apparent but just as important.
As parents, it’s our job to recognize this and make a conscious effort to help teach these obscure lessons to our children at an early age in order to impart valuable life skills and build successful habits for their future.
This includes all things related to financial literacy and how to successfully manage your own personal finances.
Despite learning a bit about personal finance at school, these teachings are often very theoretical in nature and come much later in a child’s development, making it harder to build long-lasting habits.
Here are three practical tips to start early and help teach your child how to better manage and save their money:
Growing up, it’s not uncommon for children to receive money for special events, like their birthdays. Instead of immediately using it to buy a new toy or clothing, sit down with your child and talk to them about saving up to 50% of what they receive.
Not only will this help build up their savings, but it will also mimic the classic rule of saving money earned from every paycheque, teaching them the importance of putting something away for the future.
One of the most valuable lessons anyone can learn in personal finance is how to make their money work for them. Instead of having your child’s savings sit in a low interest savings account, teach them about the benefits of investing.
Explain what stocks, bonds and other investment vehicles do and how they can be used to grow wealth.
You can start off with simple concepts, like using a GIC to create a relatively safe, long-term return and then move into more advanced concepts like dividends and TFSAs as they grow older. By tackling these concepts early on, you’ll make investing seem less daunting and set your child up for financial success.
It’s very hard to teach children how to properly budget their money early on without part-time jobs or any real expenses. To compensate for this, give your child more fiscal responsibility around the house by putting them in charge of money earmarked for their lunches.
Tell them how much you’ll give them every month and help them come up with an itemized budget, taking into account prices and how much they’ll need for each meal and snack. By doing so, you’ll not only get them excited about getting their favourite foods but teach them a valuable lesson in aligning what they want with how much they have to spend.