History. English. Math. Science. These subjects are part of typical high school curriculum. But with Canadian household debt-toincome ratio at a record 162 percent – also known as spending more than we earn – some experts believe our kids should also be taught money management skills in school. But who will teach them?
“The school system does not teach about money, so it is something that has to happen at home. It’s the parents’ responsibility to teach their kids,” says certified money coach and mom Lama Farran (maxworth.ca).
Lama points out that financial illiteracy goes hand in hand with poverty. With Canada’s child poverty rates increasing during the mid-1990s to late 2000s, according to the Conference Board of Canada, it is more important than ever to both educate our kids and sensitize them to local and global poverty issues.
“To cope with poverty they need good money management skills,” she says. “This is why payday loan shops are mostly used by low-income families. Unfortunately, poor people end up paying the highest interest rates because they get caught up in the cycle of ‘I can’t wait for my next paycheque, I’m going to get a loan against it today’.”
She has already started teaching these lessons to her seven-year-old son, who has his own savings account complete with a debit card. He has learned he must save up for things he wants: in other words, delayed gratification.
Kelley Keehn (kelleykeehn.com) is the award-winning author of nine books including The Prosperity Factor for Kids. She was recently appointed to the Financial Consumer Agency of Canada’s (FCAC) National Steering Committee on Financial Literacy, which is expected to release a national strategy on financial literacy later this year.
“Financial literacy is still an issue for the average Canadian. I can’t see how it won’t be an issue for our children and young adults moving forward,” she says. She believes parents can learn about finances and in turn teach the next generation of Canadians to avoid the pitfalls of overspending and abusing credit.
The FCAC’s website (fcac-acfc.gc.ca) offers free, easy-to-use online courses such as ‘Your Financial Toolkit’, a 12-module course designed to help Canadians manage their personal finances.
Kelley breaks down tips for helping children become financially literate:
Under 5 ›› Get your child a piggy bank. This is the age where parents can teach that money is fun.
Age 5 – 10 ›› Introduce the concept of saving with a short-term savings account. Kids can still have the piggy bank for spending money, but they are not too young to start saving some of what they bring in, whether in allowance or gifts. They can create goals for their savings.
Age 10 – 15 ›› Teach kids in this age group it’s not just about cutting budgets, but also how you can bring more money into your life. Kelley says we are typically not taught how to negotiate or exchange money. Let kids set up a yard sale, be a merchant and have that exchange.
Age 15 and up ›› Set up a mock credit system. Become “the bank of mom and dad” and extend credit to teens. Settle on an amount that is comfortable, such as $200, and teach them the parameters of using credit responsibly. Plan when they have to pay it back and what happens if they don’t. This may have a tinge of irony, given the stated debt-to-income ratio, but now is the time to reverse the trend. “I just want my kids to be aware,” says Nina Azoulay, a mother of three in Montreal. “I think a lot of people get into debt because they just want things now, now, now … and they don’t think of the credit card bill coming in.”
How Lama teaches financial gratitude to her kids:
Every night everyone has to list five things for which they are grateful. “This ritual helps them learn to be grateful for what they already have, and not always want more,” she says.
Her son asked for donations to the World Food Program in lieu of birthday gifts, which inspired others to do the same with their charity of choice.
They volunteer together to help the less fortunate with initiatives like Feed the Streets, held every Boxing Day in Montreal.
Originally published in ParentsCanada magazine, June 2015.