One in three parents surveyed say their children will always ask them for money if they don’t develop healthy financial habits while young, TD survey finds
When it comes to money, it’s important to instill healthy habits at an early age; not doing so often could create financial problems for children – and their parents – down the road. A new TD Financial Literacy Month survey found parents are worried that without healthy money habits, their children will go into debt as adults (54 per cent), always depend on parents to bail them out of money trouble (36 per cent), and will always be asking for money (32 per cent). Starting money conversations early – and continuing them as children grow – helps set them up for a more secure and confident financial future.
“Talking about money can be difficult, especially when you sometimes wish you’d made different choices yourself along the way,” says Kerry Peacock, Executive Vice President, Day to Day Banking, Investing and Transformation. “But starting the conversations early means your kids can ask you questions and learn, giving them the opportunity to make good choices around budgeting, saving and spending as they grow up, and when they’re adults.”
Canadian parents understand the importance of having the money conversation. They rank money among the top four most important topics to discuss with their child, along with being polite, dealing with strangers and bullying. But while 94 per cent of parents agree they are the biggest influence on the development of their children’s money skills, 31 per cent find it hard to broach the subject.
“Opportunities for money conversations with your kids are everywhere – from how you save to pay for their extracurricular activities, use your credit card to pay for groceries, to how grandparents can afford family visits when they are retired,” says Peacock. “Kids are curious and connected to the world around them; use your family’s real-life experiences to start conversations, and tools and advice to guide your discussions.”
For parents who aren’t sure how to start the money conversation, TD has simple advice for discussing money with children:
Age 5 – 6: Introduce your child to money. Spread different bills and coins on the table, talk about their value and what the amounts can buy – things like a grocery item, a book or an outing. Present a piggy bank, and encourage your child to add coins to it over time.
Age 7 – 8: Instill the habit of saving. Thirty-seven per cent of parents agree that age 7-11 is the right time for a first bank account. By encouraging kids to regularly deposit money into their own savings account, you can have conversations about short-term and long-term goals, while kids see the proof of how their savings can grow.
Age 9 – 12: Make the connection about earning money. According to the survey, 55 per cent of parents think it’s best to start talking to their children about money once they start getting an allowance. Rather than spending all the money at once, teach kids how to build a budget to make their earnings last.
Age 13 – 15: Cash vs. credit – be sure kids understand the difference. In the age of digital money, mobile apps and in-app purchases, it can be tricky to track spending. As your kids use their debit cards, review account balances and interest earned on deposits. With its at-a-glance dashboard and real-time notifications, the TD MySpend app helps people of all ages keep track of their spending habits and trends. To help kids understand the concept of ‘credit’, show them your credit card bill, explain how interest charges work, talk to them about why you have a credit card, and the importance of making payments on time, or preferably paying off the balance every month.
Age 16 – 18: Continue to help your child build financial independence as they plan for college or university. Even if you have funds in a RESP, having a solid plan on how to pay for extra expenses like text books, food and incidentals will help your child continue to be mindful of the need to balance spending and saving. TD Student Life is an excellent resource for setting savings goals and understanding how long it will take to reach them.