It’s Time to Teach Your Kids Their Financial ABC’sJun 30, 2015
When is the last time you had a purposeful discussion about finances with your kids? If you’re like most Canadians, it’s probably hard to pinpoint when that last happened, if ever. But financial literacy is an important and often neglected skill that all children need to acquire to create financial security for their future selves. For young children the concept of debt is unfamiliar, but most adults find themselves seeking debt relief at some point in their lives. Because regular discussions about finances and money management are few and far between, some people will learn about debt options through a Trustee or other professional, not their own parents.
If we learned that a trusted organization didn’t have its top people discuss finances or debt relief or do any financial planning, we’d be pretty bothered. How can an organization gain or sustain success and avoid financial problems without planning and open discussion, like what occurs at an Annual General Meeting (AGM)? The same is true for our families, our most trusted organization of all. Financial planning with your family can unite all of your members and create a solidarity towards mutual goals. It can also help to develop coping and problem solving skills in children, and between you and your partner. (#FamilyFinances). That’s why it’s wise to initiate the Family Annual Meeting, or FAM.
A FAM is an opportunity to meet and review financial goals and responsibilities in a “big picture” way—exploring individual and collective goals and planning ideas for budgets, debt repayment, investments and savings allows families to be creative and keep their eye on the prize. When annual goals and strategies are clear and agreed upon, follow up meetings can be helpful for keeping everyone motivated and on track. These meetings can take place quarterly, monthly, or even more often depending on your goals, timelines and comfort.
Like all things parenting, role modeling good financial behaviour, like exploring debt options, paying bills on time and making wise investments, is especially beneficial to children. Doing so can help eliminate some of the intimidation factor associated with financial management. It also tends to decrease the fear associated with talking about it. Don’t forget to be honest with children—it’s ok for them to know or be told that there isn’t money for something they want right now. It’s beneficial for them to realize you have to work and save to make purchases, and that those purchases should be meaningful and not impulsive. Having regular financial meetings that echo your FAM goals with kids is an opportunity to show them how much progress has been made. Perhaps over the course of a month the savings needed for an agreed-upon purchase (like a new outfit or a swim pass) has increased by 25 per cent. That can be very motivating for children and help them to appreciate the hard work that goes into good financial management. It also shows them that their desires haven’t been forgotten about.
When you need a little help from an outside source, keep in mind that there are endless possibilities when it comes to explaining money, debt, investments and budgeting. Great free online resources exist, such as budgeting worksheets, repayment calculators (great for teaching kids about how long it can really take to pay off a purchase), financial health tests and worksheets. Other resources like Mint.com make finances more visual, and useful books and blogs are available, too. When you think your child is ready, take him or her to a meeting with your advisor or Trustee. Being exposed to financial professionals will help kids recognize the responsibility of financial planning and keep them engaged in the family financial planning you do together. (#FamilyFinances)
The ultimate message is: don’t be shy about talking to your kids. If you don’t inform them about money, someone else will. And in today’s media crazed world, that somebody else might be advertisers or television shows or music that puts a different slant on spending than you’d like. You know your child best, so consider their age, their maturity and your financial situation and find your financial communication comfort level when it comes to discussing budgeting, debt and money management, and communicate to them your preferences during your FAM so they know what is expected of them, and what they can expect from you. Given the opportunity, you may be pleasantly surprised to find that your child is both interested in finances and becoming increasingly financially competent. (#FinLit)