Many parents devote significant time teaching their children sports, helping them with homework and how to stay safe. But with the complexities of the world we now live in, there are financial challenges that both parents and children will have to face in the future.
For children to be prepared to meet the challenges and take advantage of opportunities that will be thrust upon them, providing your children with the necessary tools to become financially responsible adults may be as important as teaching them how to skate or the do’s and don’ts of staying safe.
Throughout a child’s upbringing there will be many issues of a financial nature that you will need to grapple with. Some of these phrases may sound familiar you.
• I need ( really means want) the latest toy, video game or smartphone;
• I need (again really means want) the latest fashion trends to keep up with their friends;
• I need (again really means want) to have my own car;
• I need (another case of want) to attend the "must see" sporting event or concert;
• I need (this one is true) to attend university or community college to get a well-paying job.
There are many other examples that you may have experienced with your children. To your son or daughter, their requests may seem legitimate to them because they have a different set of priorities at different stages in their lives and will blur the line between what is truly a "need" and what is a "want."
They also may not realize that (despite the wishes of all of us) money does not grow on trees.
The point is that it may be a sound investment of time on your part to teach your children some money management skills so that they (and by extension you) do not find yourselves in a financial jam down the road. You will have to determine what the appropriate age is to begin discussing money management techniques with your children but probably the earlier the better.
Regardless of your child’s age, you will want to impress upon them benefits of managing their money wisely so that they will be able to take advantage of opportunities and meet financial challenges that come along.
For younger children, it may include providing them with an allowance and helping them set up a list of "needs" and "wants" that the allowance is to be used for. Included in the "needs" category should be a savings component.
For older children who may have a part-time job, it may be having a serious discussion with them about the tradeoff they may have to make between having their own car (and the associated costs of operating it) as opposed to using public transit and saving their money for university. They need to attend university to enhance their future job prospects; the car might impress the friends but it is costly to operate and won’t last forever.
We all know that in life there are tradeoffs that must be made. Teaching your children to prioritize their financial decisions and to differentiate between what is truly a need as opposed to a want may sound boring to them at the time, but the future payback they will experience by adopting this approach will become evident and they will thank you for the lesson down the road.
The above is not an exhaustive discussion of the subject. Parents should do their own research about the subject matter and look for an approach to discussing money management techniques with their children that works best for them.
The Office of the Superintendent of Bankruptcy has published financial guides for use by parents and teachers to teach children money management skills. You can order these publications online by visiting osb.ic.gc.ca.
» Wayne K. Palmer is a senior manager in BDO’s Brandon office. He is responsible for both the consumer and commercial practices in Brandon and surrounding areas, including Boissevain, Minnedosa, Neepawa and Dauphin. Wayne has more than 25 years experience in the financial recovery services field.