Reading, Writing, Arithmetic and Money 101

Students across Canada are back to school this month.   They will have homework for history, English and math, and perhaps someday soon they may be asking for help in their Money Management class.  Over the last year, financial literacy has been a hot topic with government and educators.  In 2009 the federal government created a task force to gauge the level of financial understanding in the Canadian public.  The task force released a report of their findings in 2010 which showed a lack of understanding of saving, budgeting and debt concepts.  They strongly suggested increasing education in financial planning topics and that the education should start as young as possible.  Since the report, BC and Manitoba have started to implement money concepts into curriculum and this year Ontario will start their program for grades 4-12. 

The school programs will take time to develop and just like reading and multiplication the concepts must be enforced at home.  So what can parents do?  What money management related lessons can parents teach children and at what ages?  Here are a few tips courtesy of the Globe and Mail and Mr. Rabbior,

1. Saving

Get young children interested in saving by opening a bank account in their name and providing an allowance, with part of it going to their savings. As they get older, use an online savings calculator to show how compound interest works and explain that the younger they start to save, the more time those savings have to grow.

2. Incentives

As soon as your children begin to make spending decisions, talk about how marketers use incentives to try to influence their tastes and decisions, and how they use points and rewards to encourage loyalty. Make sure your children are able to weigh the benefits of such rewards against the costs of purchasing the products.

3. Credit history

When your children get their first credit cards or loans, explain the importance of responsible borrowing. Talk about credit ratings and how your children can build up a good credit score by paying bills on time over several years.

4. Student debt

Long before it’s time for your children to take out student loans, help them look for other ways to pay for their education, including part-time jobs. Research scholarships, grants and government programs through CanLearn.ca. And open a registered education savings plan, in which government grants and bonds can help your savings grow.

5. Borrowing

If your children are borrowing money, make sure they understand the associated costs and interest rates. Explain how they can reduce the costs of borrowing by paying their debts as quickly as possible, rather than simply making the minimum payments.

6. Investing

Explaining risk in terms of investing is a more difficult concept, but its one financial area where youth are at an advantage because they have a longer time horizon to recoup any losses, Mr. Rabbior says.

Have a great weekend and feel free to contact me to talk about any of these topics,

Tracey