Beyond the piggy bank

Help your children build a foundation for a sound financial future

When your children were young, you may have taught them the importance of saving their allowance and counting their coins. However, as they continue to grow and take on more responsibility in their teenage and post-secondary years, your children face a whole new set of financial challenges.

From managing part-time  income and preparing for college or university  to building and maintaining a good credit rating, the decisions your children  make, with your guidance, can help them build a strong financial foundation for their future and set them up for long-term financial success.  Here are some steps you can take with children in their teens and 20s to help educate  them about finances, managing their money and preparing for the future.

Money management 101 – for teenagers

Manage part-time income 

A first job is exciting for any teenager.  With money comes freedom and independence, but it can also come with the temptation to simply spend, spend, spend. Teach your teens how to manage their part-time income with a focus on finding a good balance between spending, saving and sharing and they’ll be in better shape as their financial obligations grow.

Understand needs and wants

Image_002In the beginning, everything teenagers want – whether  it’s a new cell phone, the latest jeans or an outing with friends – feels like a need. Help them learn to identify the difference between things they want and things they need by asking some simple questions. For example,  “Do the jeans you have fit?” “Are they ripped or stained?” “How many pairs do you already have?” Once teens start to ask themselves questions and answer them honestly  before making a purchase, they’ll be well on their way towards making good financial decisions today, and later in life when they become more complex.

Grasp the basics of budgets and bills Teach your children  how to budget their money and they’ll gain a skill that’s useful for life. Understanding how much money they make every month and how much of that money they need to pay their bills instills a habit of paying bills first. Consider something you pay for, such as your child’s cell phone, sports team membership or iTunes account, and have your child pay you for this expense. Grasping the importance of meeting financial obligations is an important step towards financial literacy.


Money management 102 – heading off to college/university

Children in their 20s face increasing financial responsibilities. Here are some strategies  that young people who are headed for post-secondary studies can implement to help reach the end of their education with as little debt as possible.

Budget  for the expected and the unexpected

Budgeting for the things you know your children  will need for a year at school, such as money for rent, tuition,  books and food, is important – but budgeting for the unexpected, such as a broken computer  or unscheduled trip home, will help your children  avoid undue financial stress at school.

Organize and manage loans and scholarships

Student loans, scholarships and bursaries help offset the cost of post-secondary education.  Encourage your children  to visit their school’s financial aid office, as many colleges and universities have lists of little known scholarships and bursaries. One challenge, however, is that this money is often dispensed as a lump sum – and while it may seem like a lot of money at the outset, making it last through an entire school year requires a solid budget and deep understanding of where that money needs to go.

Start to build good credit Understanding credit and implementing good habits early on will help your children  build a strong credit rating. Establishing credit is the first step. For example,  if they have a cell phone in your name, transfer it to them. You can also get them a student credit card with a manageable limit, such as $500, and encourage them to use it for budgeted items, such as textbooks. Paying off the full amount each month is good practice for a time when their limit may be much higher.  Suggest they put a monthly payment reminder  in their smartphone.  In addition, many banks offer smartphone apps that allow customers to pay for credit card purchases right after they’re made.

You’re not alone – your advisor can help

No matter what their age, helping your children  manage  their money can seem like a daunting task. There is help. Your advisor can recommend strategies  for borrowing, saving and budgeting, and help your children  understand the bigger financial picture. An advisor can also recommend the best types of high interest savings accounts, Tax-Free Savings Accounts (TFSAs) or other savings vehicles for your children.

So, whether  you are just starting  to teach your teens money management 101 or are ready to send them off to college or university, consider contacting your advisor today.


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