Kids & Cash

There are few things parents find more awkward than having the “talk” with their children.

Discussions around saving it, making it grow and having enough of it around to satisfy their needs are usually filled with uncomfortable moments, awkward pauses and more than a few squirms.

he good news is, if you start the “talk” at a young enough age, conversations about money can be just like any other topic. Except, perhaps, for sex.

The Manitoba Securities Commission (MSC) hopes to ease the tension and facilitate discussions around money with the recent release of interactive kits called, “Make it Count: A Parent’s Guide to Youth Money Management.”

The kits, which are available free of charge via their own website, MakeItCountOnline.ca, outline some of the many opportunities parents have to teach basic money management to their children. Topics include setting goals, budgeting, investing in education, earning money, saving money around the house and online safety.

But don’t wait until your kids are earning their own paycheques to begin imparting wisdom, warns Murray Pituley, Regina-based director of taxation and estate planning at Investors Group. You can start when your kids are about four years old, he says, by using simple concepts such as the value of a dollar in a candy store.

“You have to prioritize the candies you want, buy them and realize that once you’ve spent your dollar, the money is gone,” he says.

Parents also can put money aside for their children’s futures and teach them some valuable lessons at the same time, says Scott Stewart, an investment executive at ScotiaMcLeod in Winnipeg. Visiting your local bank or credit union branch to buy a Canada Savings Bond or two is a great place to start. When the statements arrive in the mail outlining the interest earned, parents can explain how the government rewards people for loaning it the money, which could be spent on any number of federal programs, such as building roads, bridges and hospitals or providing aid to less-fortunate countries.

“Once they understand Canada Savings Bonds, you can put a few dollars away in mutual funds and start to teach them about equity ownership. From there, you could branch out into blue-chip stocks,” he says.

One innovative way to get children more engrossed in their investments is for parents to order the stock certificates from their financial advisors. (There’s usually a cost to do this.) It’s even better if the stock is in a company the kids can appreciate, such as Walt Disney Co., he says.

“That certificate says, ‘you are a partowner of that company,’” he says.

As children get older, the complexity of concepts and degree of their involvement increases. For example, 16-year-olds looking to buy their first car are quite different than eight-year-olds wanting to spend their allowance on the latest video game.

Pituley says parents will no doubt face challenges in educating their offspring, not the least of which is that the up-and-coming generation has a completely different take on money than their parents and grandparents did. Society has become increasingly affluent and people don’t attach the same value to a dollar as they did in the old days, he says.

Some of the challenges come from the parents themselves as easy access to credit has enabled them to max out multiple credit cards and lines of credit and take equity out of their homes. This hardly makes them good financial role models, he says.

“Parents aren’t comfortable themselves with a lot of these issues. It’s very difficult to relay a good agenda how to manage money when mom and dad aren’t doing a great job themselves,” he says, adding it’s also important for parents to encourage their children to discuss money and ask questions.

Len Terlinski, an investigator at the MSC, says a big part of the teaching challenge lies in the fact that money management isn’t part of the school system’s curriculum. The worst case scenario, he says, is children who don’t learn the basics at an early age and become free-spending teenagers and credit card-wielding adults who never get out of debt.

The biggest concept that has to be learned and appreciated–or perhaps feared–he says, is credit.

“Even a bank overdraft is credit,” he says. “You have to pay it back. (The bank) isn’t going to give it to you for free.”

Credit cards aren’t an evil to be avoided at all costs, he notes, but they have to be used responsibly. In fact, you really can’t get by as an adult without one. How else are you going to book a hotel, rent a car or shop online?

“It’s got to the point where not owning a credit card for middle class Canadians isn’t really an option. You have to look at it as a tool, as a means to an end, not an end in itself. If you use it right, it’s a 30-day interest-free loan but very few people see it that way,” Terlinski says.

With a growing number of fraudsters attempting to prey on young people carrying plastic, Pituley says it’s crucial that parents teach their children the significance of their debit and credit cards, treat them like they’re cash and learn to protect their personal identification numbers (PINs).

He says the downside of parents not having “the talk” with their children is they could be vulnerable to picking up bad habits, which could make them less successful later in their lives. The foundation can be laid by putting together a savings plan to buy something as basic as a CD player. As they get older and need to save for a vehicle, a house or their retirement, they’ll simply build on the base they already have.

“They’ll be dealing with larger numbers and longer-term savings projects, but they’ll understand it’s important to set goals and distinguish between what they need and want. If it’s built into their system, it becomes natural for them. It makes them a better candidate when starting jobs or launching their own business. These life skills don’t stop in the household, they extend into everything we do as adults,” he says.