What’s the key to building up financial literacy? Start ‘em young, according to Kim Parlee, VP of Wealth Management for TD.
“I think it’s one of the conversations that you want to start having at a young age,” says Parlee. “The earlier you start talking about money and wealth with your kids, the more comfortable they are with that conversation.”
RRSP Season is the Perfect Time to Start
With RRSP season just around the corner, and the resulting focus on smart saving, it’s prime time to get kids up to speed on financially preparing for the future.
Parlee recommends using it as a springboard to instill a little financial know-how in the wee ones. “Obviously, you’re not going to talk RSPs to a five year old,” she says, though she points out there are a few effective ways to ingrain some financial literacy in children.
She recommends using something like a trip to the grocery store as a catalyst, especially for educating young kids.
“Tell them ‘here’s a list of five things we want to get on sale and if we do, we get a treat’,” says Parlee, adding that the next step is to have the child help in locating the items. “Have them understand that if they do the work and put (a plan) in place to get some savings, there is a reward.”
Experience is Everything
Although it’s important to have the discussion with your kids, Parlee points out that most lessons learned in life are from first-hand experience – which parents should work to their advantage. Even something as simple as a trip to the movies or the zoo can be used as an educational tool.
“Have a jar in the house and throughout the week the parents can contribute to it… so the kids can see the jar growing, and once it reaches a certain level, you can do (the activity),” she adds.
Another idea is to set kids up with the traditional piggy bank, but to add compounding interest to their savings over time, teaching that there’s a payoff to be had for hanging on to savings.
Ultimately, says Parlee, have fun with it.
Open Communication is Key
It’s still common to take a hush-hush stance toward finances in the home. “For a lot of families in the past talking about money has been a bit of a taboo topic,” says Parlee, adding that a lot of the current generation of adults didn’t receive this kind of guidance from their own parents.
She adds that opening the lines of communication about money doesn’t have to be confrontational. “There are lots of ways to teach kids about money without sitting them down on the sofa,” she says.
The best way to teach is to lead by example – but TD’s recent study has found that this continues to be a challenge.
According to the report, 58 per cent of parents say they talk to their children about the importance of saving for retirement, but only 42 per cent say they practice what they preach.
In addition, two thirds of those surveyed say they never received retirement savings advice from their own parents, “But you have to take your own advice you’re giving to your kids,” says Parlee.
Either way, opening up the dialogue is the first step in ingraining a lifelong understanding of finances. “It takes a bit of bravery to talk (about finances) but I think it’s a huge investment in the kid’s education opening up like that.”