Teach your children financial literacy
Teaching your children about money at an early age builds a foundation for the knowledge, skills, and confidence they need to make the right financial decisions throughout their lives. Parents are the best people to teach them about money but that won’t be easy if your own financial house isn’t in order.
If we don’t teach our children about money, it may come back to haunt us. How would you feel if you had to support your adult children financially? How would you feel if you had to bail them out of a financial mess with savings you’ve set aside for your own future? What if this happened when you were supposed to be enjoying your retirement?
The impact of financial difficulties is dire. If you’ve ever struggled with financial problems because you failed to manage your own money you will know what a negative impact it can have on your life, and especially on your relationships with the people closest to you. No parent wants this for their children.
The value of money
There are lots of ways you can engage younger children with money. The challenge is to make it relevant and fun, while teaching values. Here are some practical examples.
• Stick to a budget
Give your child some money to go shopping and do not bail them out if they spend more than you’ve given. This will teach the importance of keeping to a budget
• Earn their allowance
Rather than just giving money to your child, teach them to earn it. Ask your child to do one particular task each week to earn their allowance; this will teach the value of working for money.
• Use SMART goals
A SMART goal is one that is specific, measurable, action-oriented, realistic, and time-framed. This might be a plan that needs monthly savings to meet a target. Ask your child to plan a holiday or a birthday party that is a few months away, collect money each month for that event, and let your child see the savings grow. This will teach the value of saving for rewards
Basic financial principles
Although it may not feel like a priority when children are young, these early years are an important time to lay foundations and teach basic financial principles. Teach them that when you earn money, there are four things you can do with it: save it, spend it, share it, or invest it. These principles don’t change as you grow older, but the stakes become higher. It’s better if they learn from mistakes when they’re still young.
Give them learning opportunities like going shopping or planning a birthday party to teach them valuable financial lessons such as budgeting and sharing.
Be a role model
Teaching kids how to manage money is particularly hard if you’re not good at it yourself. It is important to teach by example. Get organised with a manageable budget, keep your files orderly and pay your bills on time. Children learn by example – poor spending habits are often learned from parents.
Talking to your children about money is important. They should be aware that you have a budget and not an infinite supply of money. The most important value you can teach your children is to live within their means. If you also demonstrate this value, you will be well on your way to being a good financial role model.
About the author
Nizam is a tax and assurance partner at Shajani LLP, Russell Bedford’s Calgary member firm. A Chartered Accountant, Nizam also holds an MBA and an LLM in tax law.
With experience in both large and medium-sized accounting firms, Nizam’s expertise is in tax reorganisations, analysing financial statements and dispute resolutions and the enhancement of business processes. He has been involved in many areas of public accounting including audits and reviews for both public and private entities. Nizam provides consulting and tax planning services that include corporate reorganisations, preparation of documents for court proceedings and dispute resolutions, and the enhancement of business processes.