Helping our kids become better money managers
In the past few years, financial literacy has become a hot topic. Designating November as financial literacy month in Canada is another positive step in raising awareness and encouraging dialogue around the subject.
In writing some blog posts this month, and reading over our National Report Card on Financial Literacy, I came to the realization that it is tough to convert positive thinking into results.
Our survey found that the kids we surveyed had good attitudes toward financial literacy, but they weren’t necessarily turning this into good behaviours. Here are some results to make the point that kids tend to “talk the talk”, but they don’t necessarily “walk the walk”:
- 93% believe it is important to learn about finances at an early age
- 93% believe it is important to build up personal savings
- 60% believe it is important to have a written financial plan
When it comes to acting on these beliefs, we get a different picture:
- Less than half keep a budget to record income and expenses
- 4-in-10 don’t know how much they earned or spent last month
- Only 1-in-10 have written financial plans
The study also shows that financial literacy courses need to be both comprehensive and delivered in an effective and interesting format to have an impact. This is certainly something we can ask of the education system, but it’s not enough to get kids on the right path.
For the most part, kids report learning about personal finance from their parents or family (66%), followed distantly by a course in high school at 10%. This stat may surprise many parents – yes, your kids are listening, watching, and learning from you.
So, knowing this how can we help? Here are a few suggestions that may be worth thinking about.
First, we know that Canadians need adults to start acting on our attitudes when it comes to investing and savings. The 2009 CSA Investor Index found that only one-in-four Canadians say that they have a formal written financial plan, despite the fact that two-thirds agree that having a plan is important for people like them.
Perhaps, bringing our children into the planning process would be a good idea. They are very much a part our financial lives, so let’s involve them. We don’t have to reveal all the family finances, investments or debt, but we could certainly talk to them about how they fit into the picture with regards to expenses, education planning, etc.
Second, we know from the same survey that most Canadians (85%) believe that it is important to build up their own personal savings and investments, but 35% do not have any savings or investments, an increase from 27 % in 2006.
To teach savings, money could be set aside money in a special savings fund – maybe for this year’s vacation, a family outing, or a nice dinner. This would be an opportunity to involve our kids in the planning and budgeting process before, during, and after the event.
This could start with a News Year’s resolution to save more. This kind of project would also open the discussion around the types of financial products that are used to save money and which one might be best to realize the goal.
Third, we should find out when our kids are taking financial literacy courses at school. In B.C., kids learn about financial life skills in Grade 10. As we’ve discussed before, we offer a free resource to teachers to teach the course. Ask your kids about it, and have them run you through some of the material. It’s really interesting.
Obviously, as a parent or family member, you need to strike a balance. If you put on too much pressure or get too involved, kids will tune you out. Nevertheless, a little give and take can go a long way.
Maybe opening the window into the family’s finances a little is a good first step in getting kids acting on what seem to be solid attitudes toward financial literacy.
Let us know if you have any other ideas or experiences that help kids learn better financial life skills.