Money is not always easy to talk about. But if you are a parent, you are most likely one of your child's top sources of financial information. In order to set your children up for financial success, it's important that you talk about money openly and often. And, according to research, the earlier you can start these conversations, the better.
Research by behaviour experts David Whitebread and Sue Bingham from the University of Cambridge found that kids can grasp simple financial concepts by the age of three and by age seven many of their money habits are already formed.1
If you're not sure where to start when teaching your kids about money, there are several savings, budgeting, and investing tools you can use to help facilitate money conversations and real-life learning scenarios.
Collaborative tools you can use to teach your kids about money
Since your children can't open their own bank account or start investing until they come of age, you can take a collaborative approach to teach them about money. Here are five helpful financial tools you can use to teach your kids about money.
1. Open a youth saving account
A youth savings account is specifically designed for youth under the age of 18. Typically, children under the age of 16 must be accompanied by a parent or legal guardian in order to open a youth account.
A youth savings account is a great tool to teach your children how to use a bank account and how to set savings goals. Opening a savings account with your child can also be a good prompt to discuss concepts including saving, spending, and even how interest works.
Many youth accounts, like the Scotiabank Getting There Savings Program for Youth, offer special account features like unlimited debit transactions, Interac e-Transfer† transactions and no monthly account fees.
You also want to set a good example by using the best type of bank account for you. Look into what bank accounts you have and if they are working for you and your family’s needs.
2. Create a budget
A budget is simply a plan for how you intend to spend your money. Creating a budget helps you determine how much money you have to do the things you need or want to do. You can practice budgeting with your children starting as young as three to five years old using a piggy bank or a series of save/spend/give jars.
For older children, sit down with them and use the Scotiabank Money Finder Calculator together. It’s a free budget calculator that compares your income and expenses and gives you a better sense of how much money you have to put towards your savings.
This tool will help your children to set budgeting goals and explore the concepts of income, savings, and expenses. Your children can see how much money they have and track where every dollar goes.
3. Open an RESP
A registered education savings plan (RESP) is an investment vehicle for parents who want to put money aside for their children's education. An RESP allows investments inside the account to grow tax-free. The federal government also offers incentives, such as the Canada Education Savings Grant (CESG). Each year, the CESG provides 20% of the RESP contributions of up to $2,500, which means the CESG can add a maximum of $500 to help accelerate your savings.
Opening an RESP can provide an opportunity to talk to your children about what they want to do in the future and why it's important to start saving as early as possible. You can discuss the value of long-term goal setting and introduce the concept of compound interest.
Scotiabank offers individual RESPs and family plans to meet the specific needs of your family. Individual plans are for families with one child. A family plan allows you to share the savings among multiple children.
4. Invest with a practice account
Investing is a method used to grow your money over time. Investing is a key financial strategy that is important for long-term financial security.
In conversations about investing, you can introduce the concepts of stocks, bonds, portfolios and even diversification. You can also discuss the benefit of starting to invest early and often. Finally, reinforce the value of compound interest.
You and your teens can practice investing skills using a practice account. A practice account is a great tool to teach your kids about trading and investing without spending any real money. The Scotia iTRADE Practice Account is available for existing Scotia iTRADE clients and Scotiabank online banking customers. Children under the age of majority cannot open an iTRADE Practice Account on their own. However, if you open an account, you and your children can practice trading using a fictional portfolio worth $100,000. The best part, it's completely risk-free.
5. Apply for a student credit card
If you have young adult children who are getting ready to go to college or university, you can help them to apply for a student credit card. Student credit cards often come with perks including no annual fee and student-specific rewards.
Teaching your children about the do's and don'ts of credit card use is going to be one of the most important lessons. Before you teenager goes into the world with a credit card of their own, be sure to talk through these questions with your child, including:
- What is credit?
- Why is it important to build credit?
- What is a credit score?
- What is interest?
- What fees are associated with having a credit card?
- What is debt?
This is also a great time to discuss your personal experience with credit, both the good and the bad. Use real-life examples to drive home the importance of smart credit card use and the consequences of misuse.
If you are looking for a student credit card, Scotiabank offers two student options. The L'earn VISA* card offers a Moneyback reward program as well as savings on rental cars for those student road-trips. The Scotiabank SCENE®* VISA* card allows students to earn SCENE points on everyday purchases, earn free movies, and save at participating restaurants. Both cards come with no annual fees and a minimum credit limit of $500.
Give your kids the tools they need for a successful financial future
When it comes to teaching your children about money, frequency and consistency are key. Talk to your kids often, answer their questions, and make the topic of money a normal part of your daily conversations. Include your kids in family money decisions and give them real-life opportunities to learn. By educating your children about money and using different hands-on tools, you are helping to set them up for a financially successful future.
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