Reading, Writing, Financial Literacy

Financial literacy is critical to the prosperity and well-being of Canadians.  And, just like reading and writing, financial literacy can start early in a child’s life.

While most of us (78%) have made an effort to teach our children financial management skills, the majority of us (60%) do not think we have been very successful. Here are five tips that can help you enhance your children’s and grandchildren’s understanding of money.

Counting coins

As soon as children can count, help them identify coins and bills and then have them add up different combinations.  Make it a game by piling similar coins into piles and ask which pile is worth the most, emphasize that it is not always the biggest pile that has the most value.   When you go shopping; point out price tags on different items and when purchasing something small; pay cash and count out the change together.  Explain how money is a tool that makes other things possible.

The Three S’s

Encourage children to divide their allowance into three categories: spending, saving and sharing.  “Spending” money is available for them to use for whatever they want.  “Saving” money goes into a piggy bank, while “sharing” money goes towards a charity that your family supports.  Of course in the real world “savings” would grow with interest; so consider topping up their savings by a set percentage at the end of the month.  It is never too early to learn the power of compounding.

Do you Need it or Want it?

Talk to your kids about the difference between needing something and wanting something.  Use everyday examples like nutritious meals, school supplies and comfortable clothes and shoes vs. cookies, candy and the latest video game.  Explain that needs and wants are different for different people and will change throughout their lifetime.

Goal Setting

When children ask for a new toy, talk about its value – in dollars and what it means to them – then help them create a plan to buy it.  Offer older children the opportunity to earn more money towards their goal by taking on chores beyond the ordinary – say folding laundry, raking leaves or shoveling snow. 

Share your Values

Finally, take the time to explain in simple terms why you save, invest and protect your assets with insurance and pay off debt as quickly as possible.  Your reasons may include: wanting to build wealth, retire at a certain age, buy a cottage or make your family’s lifestyle more secure.

Keep in mind that helping children understand the basics of financial planning equips them to make smarter financial decisions as they grow up and get more control over their own money – and that may be just as important to their future success as learning to read, write and count.

Have a great weekend,

Tracey

 

Source:  Original article published in Solutions, Manulife Financial, spring/summer edition 2013