For high-net-worth families at the helm of family-owned enterprises, retirement planning is a multifaceted challenge…
“Give a child a fish and she will eat for a day. Teach a child to fish and she will eat for life.” – Anon.
Teaching your kids about money at an early age builds a foundation for the knowledge, skills and confidence they need to make appropriate financial decisions for the rest of their lives. As their parent, you are the best person to teach them about money. However it’s very difficult to teach a valued lesson if your own financial house isn’t in order.
If we don’t succeed in teaching our kids about money, it may come back to haunt us. How would you feel, for instance, if you had to support your adult children financially? Or if you had to bail them out of a financial mess with savings painstakingly accumulated and set aside for your own future? What if this happened when you were supposed to be enjoying your carefree retirement years?
The impact on our children is also dire. If you’ve ever struggled with financial problems that were brought on by bad habits or just not knowing how to manage money well, you know what a negative impact it can have on your life generally, and especially on your relationships with the people closest to you. Certainly, we don’t want that for our kids.
There are lots of ways to engage younger children with money. The challenge is to make it relevant to them and fun while instilling values. Some examples include:
- Stick to a budget. Give your child $10 to go to the grocery store to make some purchases and do not bail them out if they are over the amount given. This will instill the value of keeping to a budget.
- Earning an allowance rather than simply being provided one will instill a value of working for money (it really doesn’t grow on trees). Ask your child to do one particular task each week to earn the allowance.
- Use SMART goals (Specific, measurable, action oriented, realistic and time framed). Such as a plan necessitates a monthly savings to meet the target. This will instill a value of saving for rewards. Ask your child to plan a vacation or a birthday party that is a few months away – and collect funds each month for that event (watch the savings grow before it is spent).
Although it may not feel like a priority when kids are young, these early years are an important time to lay the foundation and teach the basics: when you Earn money, there are 4 things you can do with it: Save, Spend, Share and Invest. The concepts are the same as they get older, but the stakes get much higher. It’s better if they can learn from their mistakes when the stakes are low.
Look for teachable moments like going to the grocery store or to the mall. Planning a birthday party can also provide financial lessons such as budgeting or sharing.
Teaching kids how to manage money is particularly hard if you’re not good at it yourself. It is also important to teach by example. Get organized with a manageable budget, keep files organized and pay bills on time. Children learn by example – poor spending habits are often learned from parents.
Talking to your kids about money is also 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 exemplify this value – you will be well on your way to being a good financial role model.
This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. © 2021 Shajani LLP.
Shajani LLP is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning services.