As a parent, one of the things you are most likely to teach your child is that they shouldn’t touch a hot element on a stovetop because it will hurt them. However, it is just as important to teach them about other less obvious things that can hurt them as well, such as mismanaged finances. With less than 20% of high school graduates feeling confident about their financial literacy, it’s apparent that we have a problem.
Many parents may assume that our education system will educate their child about money and finances, and seemingly the education system checks that box off once they have covered basic arithmetic. While creating a budget may just be a simple process of addition and subtraction, there is so much more to financial literacy. Taking matters into your own hands can be a valuable lesson both for your children and yourself.
Albert Einstein once summed up the essence of personal finance quite well. “Compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it.”
With this in mind, your kids are never too young (or old) to learn about money. Either with a piggy bank as a young child or preparing to move into post secondary there should always be an open dialogue when it comes to money and how to manage it.
Here are some quick ideas geared at different age groups:
Pre-teens – For young children who don’t yet have jobs, taking the approach to saving with a piggy bank, offering an allowance for household tasks or assigning them a dollar figure for a birthday gift will allow them to begin to associate time and value to money.
Teens – As teens prepare to get their first jobs make sure you sit down with your child and speak to them about things like income tax, the “dangers of an employee discount”, the value to having a goal to work toward like post-secondary tuition, or even just the basic lesson of packing a lunch and staying out of the food court.
Post-Secondary – As your child works their way through high school, it is essential that you both start to think about post-secondary plans. Items like student loans, bursary applications, campus tours, residences and meal plans all take time and involve money. This transition to greater independence is an exciting time but also full of potential financial pitfalls. Whether it is the temptation to use your campus meal plan card to pay for a $6 Starbucks latte or else running the gauntlet of credit card offers on the way to class, some planning, preparation and knowledgeable self-restraint will really pay off for your child (and help to pay off all that student debt a lot faster!).
If you are concerned about how to start this discussion, don’t be afraid to get creative. What do home improvement, wedding and financial literacy shows all have in common? They all help people who are struggling to accomplish something without having the skills to succeed. Successful participants all go through phases of planning, budgeting, execution and tracking to reach their goals – all very good lessons that can be applied to a variety of goals at any stage of life.
Regardless of your approach, here are a few basic concepts that you should try to cover:
- What is a budget and how to follow it
- The importance of savings and how compound interest can help
- How credit cards work and how compound interest can hurt
- The value of money and separating “wants” from “needs”
- How planning and rewarding your hard work can be fun if you set goals to work toward
If you feel uncomfortable or unprepared starting this discussion with your child due to existing debt or financial concerns, call your local Halifax 4 Pillars locations to set up a free consultation with a Debt Relief Specialist.
At 4 Pillars Halifax I listen to your concerns about debt and your hopes for the future. I take this all into careful consideration as I thoroughly analyze your situation. From there I put together a strategy that is going to work best for you. I’m the one who will be creating the plan to deal with your creditors, keeping you up to date as we go! If someone has told you bankruptcy is your only option, talk to me. If it’s determined that a Consumer Proposal is a better, less drastic option, the 4 Pillars team and I will be there to help you structure the proposal on your terms as we represent you throughout the whole process.
When you have Debt Issues, who can you trust? 4 Pillars Halifax, I’m Shawn Frank, call me today at (902) 706-1120.
To learn more about 4 Pillars Debt Solutions. Visit us at 4Pillars.ca. And while you’re there, sign up for our free Debt Boot Camp.
References
https://www.learnvest.com/knowledge-center/your-financial-frenemy-compound-interest/
