Financial Friday #108: Money Smarts Learned Early Last a Lifetime!

It sounds so cliched to say, "make savings a habit" and it really is only half the picture (you need to save and INVEST your money) but developing a saving mindset early in life will pay back huge over the course of a lifetime. Your kids need to learn the value of investing their money, how compound interest works, and a few basic investing principles (diversified holdings, long-term timeline, keeping annual fees to a minimum).
 
Investing will never happen without saving, so kids must understand how and why they need to save, be extremely conscious of living within their means, and learn to carefully evaluate their spending (needs vs wants) decisions.
 
As parents we do our best, but there are lots of life lessons we need to teach, and personal finance doesn’t always top the list. We may also not be the best equipped to do the job since around half of adult Canadians live paycheque-to-paycheque! Case in point, many well-meaning parents set their kids up with a bank account, but they should actually open two accounts, one for spending and another for saving (just like adults should be doing!).
 
Credit is another potential disaster for your kids. Poor spending choices, easy access to credit cards with excessive spending limits, or simply failing to understand the implications of a student loan could have lasting repercussions when it comes time for a car loan or mortgage down the road. Many parents are quite literally paying the price for their children’s financial mistakes!
 
One final lesson which our seemingly-computer savvy youth often fail (or simply take for granted) is safeguarding their financial information. Passwords and PIN numbers need to be closely guarded and changed regularly. Young adults also need to be able to detect the proliferation of increasingly sophisticated telephone and online scams.
 
Financial literacy lessons are becoming common at schools across Canada and hopefully your kids are able to take advantage of opportunities at their school and avoid learning any costly lessons the hard way.
 

Resources

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How to stop spending money
Making more money is a lot less effective than simply spending less when it comes to improving your finances, and this quick read has a few good tips to help you cut the household budget.
 
Navigating Canada's investment savings accounts
First it was the RRSP, then the TFSA, and starting in 2023 we have the tax free home saving account (FHSA).
 
1in 3 Canadians leaving tax money on the table?
The tax filing date is almost here and many Canadians are anxious and unclear about many tax-related matters.
 
7 Common credit score myths
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