Credit Education Week Canada

• A Group Effort • Delivery is everything • When is it a good time? • Where does money come from? • Baby's First Budget • The Value of a Dollar • Needs Versus Wants • Savings Account • Chequing Accounts are a must! • Teens • A Registered Education Savings Plan

If you feel as though you don’t have enough of a handle on your finances to be able to 

teach your children about sound money management skills, make it a point to learn through 

interactive tools such as the one’s offered through the Credit Education Week website. Take 

this opportunity to not only save your children from a lifetime of money troubles, but also 

yourself. Get your children involved and make it a family project where they feel they are making 

a difference to their family’s overall financial stability. If you think your kids are old enough

to understand the basics about money management attend a financial seminar with your kids,

such as the one’s offered by credit counselling agencies.  Ask your kids to help you figure 

out the family’s budget by working through an expense guide, such as the one offered in the 

Credit Education Week booklet found by clicking here.

Many parents don’t know when they should introduce the concept of money and money management to their children, but as the saying goes, ‘the sooner the better.’ If your child is over the age of three, then you can start teaching her/him about money today through some simple exercises. For example, if you have children between the ages of three and seven you can teach them the general shapes of different coins, how to distinguish them, how much each one is worth, and the different places where coins are kept, such as a purse, wallet, and/or piggy bank. Parents don’t need to allot a particular date and time to speak to their kids about money; it’s something that can be done on a day-to-day basis whenever the topic of money management arises, such as a car ride to the bank to pay some bills, shopping in a store, or browsing to find a particular item at a price that’s within budget. When shopping and passing by desirable items on display, such as a plasma television

Many children don’t know how it is that adults have money. For example, some kids think that ATM machines dispense money to whoever wants it; they have no understanding that it is only if you’ve earned money that you can access it through the ATM or other bank machines. So you should explain to your children that mom and/or dad earn money by doing work, just like how children earn good grades by doing work in school or they earn ice cream after dinner by eating all their vegetables.

When some parents approach teaching their children about money, they concentrate only on teaching them how to earn it. The problem is that if children don’t first learn the value of money then once they have it they’ll simply waste it on, well let’s be honest, junk. By teaching your children the value of saving money, not only are you advising them on the value of spending wisely, but you’re also helping them take their first steps towards financial freedom with lessons that will serve them a lifetime.
Kids ages 3 – 7
Children have a tendency to think that more money means more value, so they think that ten pennies are worth more than one quarter. A good exercise for them to learn the value of money is to have them help you sort coins into rolls so that they learn that a roll of pennies is only worth $0.50 but a roll of dimes is worth $5.00. You can even make a trip to the bank together to deposit your rolls of coins into a savings account.
Kids ages 8 – 12
Children who are older may understand the difference between a hundred pennies and a hundred dimes but they may still need some help understanding the value of saving. You can teach them this by giving them options on how they could spend money. For example, explain that they can use $5 now to buy some candy, cards, or whatever else they sell at the local dollar store, but if they saved those $5 for four weeks they could purchase something of greater value, such as a pair of shoes or a toy they’ve had their eye on for a while. Another option parents have is that when they go out to eat at a restaurant, they give their kids the option of ordering water and getting the dollar that would have gone towards ordering soda, or ordering soda with their meal. Some kids will opt for the dollar and others will prefer the soda, but the point is that they are learning the value behind the choices they make.

This lesson is paramount because not learning the difference between needs and wants can come back to haunt us as adults if we don’t learn as children. Many of the problems associated with debt can be completely avoided if one was able to distinguish the difference between needs ands wants. Needs are necessities for living, such as food and shelter, whereas a want is something desired but not needed for survival, a coffee from Starbucks.
Kids ages 3 – 7
In order to help your children understand the difference between needs and wants you can have them divide a sheet of paper into two columns, one column entitled “needs” and the other “wants.” Under each, have your child write down everything she/he thinks they need and want, respectively, and then ask them to list all of their ‘wants’ in order of importance. Do a list yourself along with them that way they can have a clear example of the distinction between needs and wants, and also for them to understand that there are things that mom and dad would like to have but can’t either. When you’re both done show your child your list and then review theirs with them, item by item, and ask them why it is they think something is a need rather than a want, and vice versa. If they have written something that is a “want” under the “needs” column, such as new pair of running shoes, comic books, or toys, don’t criticize or scold them; instead ask them why they believe the item is something they need rather than something they want. Then explain as clearly as you can why that item belongs in the other column. Don’t underestimate your child’s capacity to understand the rationality behind needs and wants. If you explain the reason why you think that something is a want rather than a need, they will understand your reasoning if you explain it to them in a way they can understand.
One last piece of advice to dealing with your children’s wants is to tell them that they should only consider those wants that are most important to them so it should be the one at the top of their list. Also, ask them to come back to you in a month. If the same item they want is at the top of their list after a month has gone by, tell them that you will help them acquire the item as long as they can pay for half of the price without delving into their savings. This helps you get out of saying, ‘no’ while also engaging them and taking their opinion into account so that feel they have more control over the situation.
Kids ages 8 – 12
After the concept of a budget is generally understood, your children should be given a weekly allowance so that they can put what they learned into practice. Tell your kids that an allowance is money that they earn in exchange for things such as maintaining good grades at school and doing chores around the house. Some parents like to give an allowance to children based on household chores they complete throughout the week. If you’re thinking about giving them an allowance based on chores completed, a good rate to start children off is at about $0.10 per minute of work they complete, which means that it will take about four hours of work to earn $20. If they do the job well and efficiently, they should be promoted and their rate should increase accordingly, but if on the other hand they do a poor job, they should be demoted and their rate should decrease accordingly. Make sure to ask them to do chores that actually help you, such as doing their bed and cleaning their room. As they get older the chores should increase in degree of responsibility such as doing the dishes, laundry, and cleaning the bathroom. What this teaches children is that money doesn’t come to those who are lazy; it’s earned.
Now, what they do with the money they earn is what will allow them to understand the value of it. For example, if they want the latest video game and it costs $20 dollars but their allowance is only $5 a week, they know that they will have to wait for four weeks until they can purchase the game. If the price of the game decreases during the time your child waits to purchase it they will also learn about opportunity cost; the money they saved because they waited is like extra money in their pocket.
You must remember that kids are just like adults, they need motivation to save. Therefore, it’s important for your child to set short and long-term goals. For example, if she/he has her/his sights set on something like a bike, skateboard, roller skates, or a pair of running shoes then a good idea is to propose that if they save enough for half of the item, you will provide the second half. You may be surprised to discover that once they learn they can buy things they want with the money they earned they will begin to hoard every nickel they can get their hands on. Soon enough you will have a perpetual saver on your hands.

A piggy bank is great for extra change but everyone over the age of four should have a savings account. Some children develop a negative stance towards savings because they see it as an obstacle to things that they want, but explain to them that a savings account is simply money to spend later.
Kids ages 4 – 7
The experience of opening a bank account should be fun and memorable for your child. You may want to set-up an appointment with your bank officer and explain that you want your son/daughter to meet with him/her in order to explain the importance of opening a savings account, how safe their money will be in the bank, and how they can make regular contributions to their savings. If the bank has any promotional materials, such as pens, you can request for the bank officer to have some ready for when your child opens her/his account. This is an important experience for your child to begin to develop a positive and regular relationship with their banking institution.
Kids ages 8 – 12
Once they have a savings account encourage your child to contribute a set amount to their savings each week, at least 25% of their allowance and any cash gifts they receive for special occasions such as birthdays or holiday gift money. It’s important for them to not only see but also keep monthly bank statements so that they learn about the glories of compound interest. You may want to get a binder so that each time you get the bank statement you and your child can review the statement and added into the binder. As their money grows so will their excitement which will only motivate them to save more.

Opening a chequing account is like a rite of passage for young adults. You should explain to them all of the advantages and disadvantages associated with Opening a chequing account will not only teach your kids the basics about depositing, withdrawals, banking safety measures and balancing the monthly statement, but they will also learn to avoid the extra charges associated with overdraft fees.

Although it’s always best to get them when they’re young (so that you can avoid that nuisance of rebellious behaviour against anything you suggest), it’s never too late to teach your children about money. If you have kids in high school you should encourage part-time work. Not only will this teach them about discipline and time management, but they will also be able to enjoy a little something called independence. Advise them that a percentage of the money they earn while working should be put into a savings account for post secondary education. It would even be a good idea for them to dabble in some investing. There are many financial web sites that can be used to introduce teens to the basics of personal finance, including Practical Money Skills, which is a website sponsored by Capital One, Visa, as well as banks such as Royal Bank of Canada. These websites provide a wealth of information on financing for students.
Although most parents are uncomfortable talking about income and expenses with their children, it’s important for teens to know what their parents are doing for them and how hard they are working at providing them with all of the essentials. It also invites teens to take more part in family affairs, which helps them feel more like adults. In some cases, it might even be a good idea to show your teens how much you pay for your house, groceries, medical expenses, gas, hydro, phone, internet and cable bills on a monthly basis. This will give them a more realistic picture of what it costs nowadays to live the lifestyle that they do, as well as perhaps giving them a bit more understanding as to why they can’t always have the latest technological gadget or trendy pair of boots.
A great exercise that helps to teach teens about saving and keeping within a budget is to ask your teenager to help you make a list of the groceries you need for the week. Give them the amount of money that you would normally spend on groceries but, and here’s the fun part, tell that that if there is any money left over they can keep the change. Remind them that they have to purchase everything on the list. If they’re unable to find a particular item then they must either find an alternative or give you back the amount for the item missed. You may also want to encourage them to check out flyers for deals and explain which grocery stores to shop from and why. This exercise will help you determine whether or not your child is independent enough to manage money wisely, your teen will learn that groceries are not as cheap as he/she may have thought, and they’ll learn how to be a savvy shopper.
Set boundaries and stick to them
You’ve taught them the importance of a dollar so now comes the part where you have to stick to your guns and not lend cash when they’re running short. If they don’t have any legitimate reasons for not having enough money to go to the movies with their friends, do not get into the habit of giving them the money. It's not a problem if it just happens occasionally, but if you get into the habit of supporting their over-spending then they will get into the habit of depending on mom and/or dad whenever they blow their money on unnecessary things. Remember that learning from their mistakes is just as important (or even more so) as learning from their successes so do your children a favour and let them learn the lessons from overspending now, when the only consequence of overspending is perhaps staying in on a Friday and Saturday night, rather than later when the consequences of overspending can mean a bad credit rating, incessant collections calls, or even eviction.
Saying ‘no’ when you want to say ‘yes’
There is an epidemic in current North American culture and it has to do with parents forgetting that they are parents all for the sake of getting their children to like them as people, or to be accepted by their children. Although it would be lovely to be your child’s friend, and it will most likely occur when your children grow-up into adults, parents must remember that if they are raising children, now is not the time to impress your kids. Your children are not there to try to make you feel better about yourself and they aren’t people you need to impress. In fact, saying ‘yes’ to all of your child’s requests is one of the most selfish things a parent can do because the only thing you are concerned with is not disappointing your son or daughter so that they still like you, or think that your just the greatest mom or dad. Your only job as a parent is to provide an environment and setting for your children so that they can grow into responsible and happy adults, and in order to do just that you need to teach them discipline.

Furthermore, if you say ‘yes’ to their every desire they will grow-up with a sense of entitlement to whatever they want. However, there will come a time in their lives when someone will tell them ‘no,’ like a teacher or authority figure, and when that happens they won’t be emotionally prepared to hear that. So what’s the lesson here? Sometimes having your children hate you is the best way to show them you care? No, no, no. The lesson is that as a parent you provide your kids with what they need and sometimes that means not giving them what they want. Saying ‘yes’ or ‘no’ shouldn’t depend on your income or on the status of the economy, it should only depend on the kinds of values you want to teach them. But don’t worry, the truth that most kids won’t tell you is that whether or not they like you or hate you, it has nothing to do with what you buy them and has everything to do with what you provide them: a safe, loving, and nurturing home and family.
And above everything else…
Your encouragement to treat money with respect will stay with your children always. The exercises discussed here will help you teach your child to be mindful with her/his finances and to view money as a means to achieve higher ends. Their ability to do so will be due to the knowledge and skills you have empowered them with, so congratulations on your hard work!
For those parents who want to be a little more proactive in saving for their child’s future education a registered education savings plan would be a wonderful tool to help you do just that.

An RESP is a savings account registered by the government of Canada that allows you to save for a child’s post secondary education, and for those savings to grow tax-free. The government also contributes to an RESP through the Canada Educations Saving Grant and the Canada Learning Bond, if you qualify. They are a great way for you to save for your child’s education in advance, for your children to understand the kinds of investments you are making for their own benefit, and for you to demonstrate the confidence you have in your child’s educational capabilities.
To open an RESP both you and your child must have a social insurance number. Once you have ensured that the child for whom you are opening the account for has a social insurance number you can choose the best RESP provider that suits your needs. Most banks and credit unions offer RESPs so it would be best to do some research as to which one would be best for you. Before you open an RESP, remember to ask the RESP provider to explain any fees, limits, penalties or requirements to make regular payments. For more information on RESPs, check out www.canlearn.ca