What are the best ways to teach your kids about saving?July 23, 2020
Many of us boomers were good at ignoring the great financial advice given to us by our more successful parents. That meant we had to learn about personal finance in the School of Hard Knocks, and may explain why most of us now owe $1.70 for every dollar we earn.
Great steps are being taken to ensure the upcoming set of young Canadians get schooled a bit about money; CNN recently reported on Ontario’s plans for financial literacy classes in the primary grades.
Save with SPP had a look around the “information highway” for some thoughts on what the top things we parents should be tell our kids and grandkids about managing money. The folks at the Homeownership.ca blog offers a few tips from noted financial author Gordon Pape. First, Pape tells the blog, talk about money, and be open about it with the kids. Why let them grow up “in a world of ignorance” when you can instead honestly answer their money questions? The second tip is to avoid trying to teach them things you don’t know about, and to make the learning fun – make it more of a game.
Yahoo! Finance Canada adds a few more ideas. “Encourage teens to get jobs and earn money,” the site advises. “Help your children open a bank account. Show your kids how to map out a budget.” Other ideas here include using a glass jar as a piggy bank, so the young ones can see their savings grow, and talking to kids about how credit cards work.
The federal government has some ideas to share about money also (no snickering). Lead by example and use your own credit wisely, the site suggests. “If your teens see you using credit wisely, they may be more likely to follow your example,” the site adds. The key messages for younger credit users is that credit is not income – it is borrowed money that has to eventually be paid back. As well, the site notes, “if they repay the full amount they spent each month, they won’t need to pay interest.”
These last points are key, and something many of us either don’t know or don’t really want to hear. A line of credit or a credit card is a convenient way of borrowing money from a lender. While you can access money from these sources just as you would from a bank account – you can tap to pay, you can pull bills out of a machine – what is less visible is the cost of that borrowing.
Years ago, the federal government mandated credit card companies to show how many years it would take to pay off a credit card if you pay only the minimum amount. That’s another good thing to show the younger set!
If you are teaching your kids about saving, and they are old enough to start a retirement savings account, a nice option is the Saskatchewan Pension Plan. Younger people have a huge savings advantage – they may be 40 or more years away from retirement. That’s four decades for every invested dollar to grow. So starting young on retirement savings will pay off generously farther down the line.
Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.