Education is top of mind for many when it comes to September. Kids are back to school, professional conferences and personal development training is gearing back up, a new year full of promise and opportunities for learning lies ahead.
And while parents can count on the school system to cover the three R’s, and other mandated educational curriculum, one of the most important skills that can be imparted onto children doesn’t get taught in schools, and that is financial literacy.
WealthCo Senior Investment Counsellor, Claude Spencer, reinforces just how critical this skill is.
“Effective money managements stems from good financial habits. The earlier kids are taught financial literacy, the better. Early exposure creates financial resilience, develops habits that reduce financial stress, and overall helps to set them up as financially responsible adults.”
When is the Right Time to Start?
Trying to discuss interest rates and taxation strategies with a toddler is unlikely to lead to the desired outcome of a fiscally healthy and responsible contributing member of society. So, when is the right time to starting broaching financial literacy with your kids?
“If kids are mature enough and have the capability to understand concepts, I think as early as preschool is fine,” Spencer shares. “In my household I taught my son about finances at about five years old. If he packed his toys away and kept his room clean, he would get $5 per week but he had to save $2 of that amount.”
Household chores are a great way to start teaching financial literacy to kids. In addition to contributing to the household and building basic life skills, introducing a chore routine helps to empower kids to take charge of their finances and understand their relationship with money.
Key Financial Lessons to Impart
When it comes to financial literacy, there are a few key lessons that every child should learn.
“First and foremost, it’s important to understand the difference between a need and a want,” Spencer advises. Just because you want something (ahem, Playstation 5) doesn’t mean you need it.
It’s also important to teach your kids about the value of money and the almighty savings. Get them saving early and get them saving often. Helping them to understand that the sooner they start putting money away, the more time it has to grow. Teaching children about the value of money can help them to understand the importance of saving and can help them to make informed choices about how to spend their allowance.
Budgeting is another key financial skill that will serve kids well later in life. Thanks to marketing departments who understand the power of a whining child, kids are often inundated with messages about spending money. By showing them how to track their income and expenses, you can help them develop the financial literacy they need to make wise spending choices as they grow older
And finally, it’s crucial to know how to manage debt. Managing debt is an important life skill that all too often goes neglected. Many people enter adulthood without a clear understanding of how to use credit responsibly, and as a result, they find themselves in difficult financial situations. By teaching children about managing debt, we can help them avoid making the same mistakes. Children as young as kindergarten age can begin to learn about the concept of borrowing and repayments. By the time they reach their teenage years, they should have a good understanding of how to use credit cards and other forms of borrowing responsibly.
Financial Literacy Resources
Especially for parents who were raised in a household where financial literacy was not taught to them, it can be daunting to know where to begin.
“The way to introduce financial literacy will vary by family and how they were taught by their parents,” Spencer points out. “In my household growing up the phrase ‘money doesn’t grow on trees’ was frequently used and paved the way for my introduction to finances.”
Fortunately, there are a ton of resources available to help parents in their financial literacy educational adventures. Here are a few that we like:
- A Dollar for Penny – recommended for ages 4 – 6, this book about a young girl and her lemonade stand combines the teaching of addition with a traditional rite of childhood entrepreneurship;
- Money Mentors has a number of free resources available including printable extension activities broken out by grade, and Conquer Cashalot, an online game set in medieval times to teach kids about making smart decisions about money;
- Entrepreneur shares a great list of the 7 best books for financial literacy for kids and teens; and
- ACT for Youth has several resources designed to help youth achieve financial literacy, including workshops, an interactive website, lesson plans, activities, and more.
As Senior Investment Counsellor with WealthCo, Claude Spencer understands the importance of financial literacy, and as Dad to a 23-year-old he especially appreciates the significance of sharing this knowledge with the next generation in order to best set them up for success. One of the things that Claude likes best about working at WealthCo is the opportunity it provides him for building deep client relationships and seeing his clients thrive in both their personal and professional lives.
The Integrated Advisory community consists of a network of progressive CPA firms, along with best-in-class professional advisors, service, and product specialists, who work together to deliver an elevated and holistic client experience. One that optimizes both their personal and professional lives with an integrated financial strategy designed to help clients reach their goals.