We teach our kids chemistry, mathematics and even Shakespeare in school, but when it comes to our personal finances they’re on their own to learn the basics. With the debt-to-income ratio reaching new heights and a chronic lack of savings, it’s clear many Canadians are living beyond their means – and it’s likely due to poor money habits formed earlier in life.
Where Are We Getting Our Information?
If school doesn’t spark our interest in investing, then what will? According to a recent Scotiabank study, 17 per cent of adults said financial advice from mom and dad encouraged them to start investing. That was second only to entering the workforce at 39 per cent.
Personal Finance Shouldn’t be Taboo
Whether you have a toddler, teenager or a 20-something-year-old, there are plenty of ways to start them off on the right foot financially. Financial planning shouldn’t be shrouded in secrecy; while you don’t have to disclose every detail about your finances, including children in discussions about budgeting is a good start. If you want to teach your children the value of a dollar, set a financial plan together. Explain that by saving an extra $200 a month the family will be able to afford to go on a trip to Europe next summer. Whether it’s at the kitchen table or in the living room, talking about personal finance is a good way to set your kids up for later in life when they’re managing their own finances.
Hindsight is 20/20
The study found that many adults have regrets about their past financial strategies. In response to the question “if you could change anything about your personal finance situation, what would it be?”, 44 per cent of respondents over 55 years old said they wished they had started investing when they were younger. Whether you’re a teenager with a part-time job or a recent graduate saving for your first house, getting an early start in investing with a solid financial plan is a great first step.
Top 5 Financial Takeaways
Although there’s no guarantee your child will be the next Donald Trump, it’s never too young to get your kids thinking about money. A great place to start is financial goal setting. Teach your children the importance of setting short, medium, and long-term goals. Goal setting is a great way to develop a financial plan instead of simply hoping for the best.
Distinguishing between needs and wants is another important step. While it would be nice to always have the newest high-tech gadgets, it’s important to teach your kids about budgeting and prioritizing. If you spend all your money on take-out food and extravagant vacations you’ll have no money left over for retirement savings. Third, it’s important to pay yourself first. This can be easily accomplished through automatic transfers. Whether you’re putting money in your TFSA, RRSP or high-interest savings account, a little goes a long way to reaching your financial goals.
Keep Track To Stay On Track
You’ll never know how much you’re spending if you don’t track it; staying on top of how much you spend is the fourth important lesson. If you realize you spend over $400 a month on restaurants, it’s a lot easier to cut back and put those savings to work. Lastly, it’s important to set financial benchmarks and review your progress on a regular basis. Going through life without a financial plan is like driving somewhere new without a map; you might get there eventually, but it will most likely take you a lot longer.
This post is also available in: French