by Brenda Wood, Licensed Insolvency Trustee
Who has not heard “Just use your card Mommy” after you have told your child you couldn’t buy a toy they wanted?
Canadian families are facing a money crunch! With record high household debt levels, climbing rates of insolvency, increased filings of consumer proposals, debt settlements and bankruptcy it is time to teach the next generation how to manage their money and avoid debt issues. Teaching children good money management in their early years will serve them well as they grow into adulthood. Try these tips and references.
Teach them where money comes from: explain to your child that you work to make money and the bank is a safe place to keep your money. Your bank card just gives you access to that money but it is not a never ending supply. Help them understand that if you use your credit card instead of your debit card them you are borrowing the money from the bank and you have to pay it back.
Budgeting: Giving your kids an allowance is a great way to teach them budgeting. If they spend every cent on a toy and they don’t have enough to buy the video game they wanted then that is a good thing. Don’t step in and buy it for them. It will teach them the consequences of overspending and impulse buying.
Savings: Teach your children to “pay themselves first”. Go to the bank with them and set up a bank account. Have them put some of their allowance in the account each “pay day”. Talk to them about a goal they might have for the savings they are accumulating. Is there a special item or event that they could save for?
Keeping track: Ensuring a child knows where they have spent their money is a great tool for budgeting later in life. Depending upon the age of the child, have them use a notebook to record spending or keep track in an app or on a spreadsheet.
Marketing: Help your child understand marketing strategies. Show them how marketing works and how TV ads and product placement tends to make you want to purchase something you may not need.
FOMO: Also known as “Keeping Up with Joneses”, social media has made FOMO “Fear Of Missing Out” a very real problem. FOMO can make kids, and adults, think they are missing out if they don’t have the latest electronic or toy. Have a discussion with your child about spending on items that may not be necessary just to keep up or look cool.
Share: Have your kids save up some money from their allowance, bottle collecting or some other source to give to charity. This teaches them that money can be used to help those less fortunate and not just to buy things. Let them know that the amount donated isn’t what matters – every little bit helps.
For more great savings tips and other financial information, follow us on Instagram @mydebtfix, on the Salyzyn Facebook page, and on our website at www.mydebtfix.ca.
Brenda Wood is a Licensed Insolvency Trustee with Salyzyn & Associates Limited. She has over 20 years of experience in the financial industry.