Alison Griffiths started working when she was 12, picking strawberries in order to buy her very first sleeping bag.
“My family had little spare change at the end of the month so we definitely weren’t spoiled,” she says. Since then, Alison has run a number of successful small businesses with her husband David Cruise, written 10 books, a screenplay, numerous personal finance columns and hosted Maxed Out. Today she is one of the country’s most prominent money experts. so we turned to her for advice when putting together our Money 101 issue. “Kids will develop their own relationship to money, but parents can definitely influence how their children understand and manage it,” says Alison, who has raised two daughters. Knowing the most common financial mistakes parents make and how to avoid or fix them is a big step on the road to healthy family finances and money savvy kids. Check out Alison’s quick fixes for common money mistakes, as well as her list of online resources.
1.Different kids, same approach
We know kids mature at very different rates physically and emotionally. But parents with more than one child often expect them to grasp financial concepts at the same time and rate. There are many parts to the money puzzle, from basic math skills to complex cognitive awareness. You may have to alter teaching methods and expectations for late financial bloomers.
2. Failure to fail
We set children up to fail financially down the road by not letting them fail in the here and now. Everyone learns by making mistakes, especially children. And where better to falter than in the bosom of the family? The next time they are insistent on making what you think is a bad money decision, consider letting them experience the consequences.
3. Keeping up with the you know whos
Keeping up with the Joneses is a sure route to financial disaster. If a child wants something because their BFF has it, look for alternate items or help them map out a savings plan. Sharing among friends is also an option for things such as game platforms. And when it comes to summer camp, they’ll survive a couple of weeks without friends if your wallet says no.
4. Procrastinating over RESPs
You’ll contribute when you get that raise – honest. Nope, do it now! Get the 20 percent Canada Education Savings Grant on the first $2,500 deposited annually. Free money folks! Strapped for cash? Ask relatives for deposits instead of gifts, cut out one purchased lunch weekly or transfer the child tax benefit. At birthdays and holidays make an RESP contribution a regular part of your gifts.
5. Forgetting the roses
It’s easy to forget that part of the reason we want money is to give us time to smell the roses. Spending time rather than money is one of the best ways to raise financially aware and responsible children who recognize that not everything pleasurable costs money. From the library to the park, it’s there if you look.
6. Birthday blowouts
Birthdays easily become expensive nightmares with pricey gift bags and rented entertainment. Save extravanganzas for certain birthdays – say five, 10 and sweet 16. Nix the gift bags, place a cap on purchased presents and let kids participate in baking treats. Bring back the inexpensive fun. Jumping through the sprinkler at a BBQ or a movie sleepover will be just as memorable as any blowout.
7. Chores for allowance
In our eagerness to turn our kids into responsible adults and learn that work is about money and vice versa, parents often tie chores to an allowance. But this sends the wrong message at an early age. An allowance is about participating in the family, sharing and learning how to handle money. By all means, let your kids work for extra dough – I ironed my Dad’s handkerchiefs for a nickel each – but keep allowances separate.
8. Buying all their clothes
A clothing allowance teaches valuable lessons. But teens often falter with their first experience. Try giving responsibility for purchasing items at a younger age. Pick a favourite part of their wardrobe and let them develop comparison shopping skills. Gradually add in more items to teach them about budgets and choices. Then, as teens, they’ll have the tools to handle a full clothing allowance.
9. Singing the don’t need/can’t afford refrain
In a rush-rush world, the stock answers to kibosh kids’ wants are: “You don’t need it,” and “I can’t afford it.” Both may be true but use those words sparingly. Instead, point out that the child already has a similar shirt or the old cereal isn’t finished yet. They may not be any happier but you’ve given them higher quality financial information to digest.
10. Bailing out kids
Whether it is going over cell phone minutes or a stalled savings plan, we parents are masters at bailouts. Often it is just easier than steering kids back on track. Set and stick to spending limits and encourage saving but don’t step in and solve their financial problems. Little mistakes while they’re young become big mistakes in adulthood.
Alison Griffith’s online picks:
There are a host of valuable resources for parents who want to increase
their own financial literacy and that of their children. Here are some
of my favourite sites:
- www.creditcanada.com – A not-for-profit debt and credit counseling charity with great tools and tips.
- www.fcac-acfc.gc.ca – The Financial Consumer Agency of Canada helps protect and educate consumers.
- www.bmo/smartparents – A new site created by BMO which has oodles of games, articles, blogs and real-life webisodes.
- www.getsmarteraboutmoney.ca – The site of the Investor Education Fund, a financial literacy agency funded by the Ontario Securities Commission.
- www.funnymoneyinc.com – James Cunningham is the Funny Money man and his site is a great stop for high school students and their parents.
Published in ParentsCanada magazine, May, 2011.