Canadians can be justifiably proud that, as a nation, we’re almost universally literate. But when it comes to “financial literacy”, too many of us would get a failing grade. It’s never too early to learn how to be smart with your money. So, to kick off Financial Literacy Month, here are some ways young Canadians can become more financially literate.
Financial Literacy Canada: It Starts With Family Planning
My kids are only five and eight years old, yet they both already have a pretty decent sense of the difference between wasting money and saving for something special. My older daughter, for example, recently knocked over a night table lamp and was quite concerned about how much it would cost to replace. And we used our summer vacation as a lesson in savings. We spent a week exploring the sights in New York City, but that meant we wouldn’t be able to go to Canada’s Wonderland.
Allow For Learning
One great way to help your kids learn some money smarts is to give them an allowance – provided that it’s tied to a specific set of chores. The latter is key as it also helps instill the work ethic. If you don’t do your job, you won’t get paid. But, when you do get paid, it’s up to you to determine how you spend your money. Of course most kids will opt for the instant gratification of blowing their allowance on a new toy or treat. And, for at least the first couple of weeks, you should let them. But once they’ve gotten used to have some cash in hand, spring the real lesson on them:
the next time they ask for a moderately pricey item, tell them that if they want it, they’ll have to save up for it.
Get Your Kids Off To A Smart Start
One of the first steps in becoming a fiscally sound person is to understand the value – and rewards – of saving for the future with a bank account. All the financial institutions are, ahem, banking on creating lifelong customers, so they offer some pretty generous terms for youthful customers, including no monthly fees and interest rates up to two per cent.
Encourage your children to deposit money from birthdays, holidays, and visits from the tooth fairy, then help then track how their savings – and interest – grow.
Saving for post-secondary education is going to be a tough sell for young kids, but if your tweens and teens are off to a sound financial start, you should be able to persuade them to see the value of a college or university degree. Various studies, including this Stats Canada report show that higher education generally leads to higher earnings.
But, school can be expensive. If you haven’t already opened up one for them, talk to your kids about Registered Education Savings Plans (RESPs). This federal program works much like RRSPs in that you select a group of “registered” investments, make a contribution, and (hopefully) watch your investment grow. But the Canada Education Savings Grant contributes a 20 per cent top-up for every dollar you contribute to an RESP (up to $500 a year on a $2,500 contribution). Low-income families and residents of Alberta are also eligible for additional grants.
Learn and Win
Are you a teenager, or do you know any teens that might be interested in a winning an iBook, iPad, iPod, or $50 iTunes gift cards? And, yes, that’s a redundant question. Here’s how to win them:
The Financial Consumer Agency of Canada is running a contest to encourage Canucks aged 13 to 19 to create short (30-second to two-minute) video clips of themselves explaining, “How talking about money with [someone] helped me…” The contest closes November 30. Click here for full details.