By Tara Tennant, BBA, EPC, Financial Advisor
Assante Financial Management Ltd.
Have you ever wondered how to start teaching your kids about money? With so many money messages bombarding us every day, it’s a struggle to find the right information for ourselves, let alone try and sluice through it for the right things to teach our kids. As a financial professional, I thought it might be helpful to share some important money lessons that I’ve learned and that I’m teaching my kids. I also reached out to a fellow professional and good friend Sarah Morkin of Quiet Legacy Planning Group Ltd. to get her thoughts as well. We hope you find it useful and learn some things to take to your little ones!
What is the first lesson that you remember learning about money? Looking back, was it a good lesson?
Sarah: My parents almost never talked to me about money... it was a topic that seemed to have a lot of secrecy around it for reasons I didn't understand. When I was 7, my mom separated from my Dad and moved us kids into an apartment in Windsor. There was a major culture shock from my old elementary school to the new one and although it was rough at first, I think it was inspiring as well.
A girl from my class asked to borrow my pencil case (which was full of new markers) and I offered it over without question. I later found that same girl out in the playground selling "tattoos" on the swing set... and she was making real money! Her pockets were full of nickels and dimes, but when I inquired for my own tattoo... I quickly realized that her tools of the trade were MY markers. Half of my heart was mad at being misled, but I felt equally inspired to become my own entrepreneur.
Over time, I would learn that this girl came from a rough end of town and her home life had a lot of uncertainty and strain. This experience led to an unexpected friendship and years later I can totally credit my success in countless school/non-profit fundraisers to this girl and the life skills that she shared with me from her own ingenuity and drive for self-reliance. I often wonder where she is now and how she is doing.
Tara: I was raised by a single mom who worked for a non-profit in a small town. I never felt like I was missing anything, but I was also regularly reminded that I couldn’t have everything I asked for. Brand name jeans, extra movie channels, and video game systems weren’t priorities for my mom. She never told me we “couldn’t afford” it, just that it wasn’t important. It was presented to me very much as a choice. We could spend our money on those things, but why? We don’t need it. And she was right.
Because of the choices we made, we were able to save up enough money to take an amazing trip my senior year of high school. The lesson also had the benefit of teaching me the importance of having my own money. When I was 16 and started working, I was still dead-set on getting a Sega Genesis. I saved up enough money to buy one for myself. It was so satisfying to play on that game system knowing I had earned it and bought it with my own money.
Without knowing it, my mom was teaching me a really valuable money mindset. Not about needs vs wants, but about choosing items carefully that we know are going to bring us joy. Not only did I have to earn that Sega with my own money, learning in the process how much I have to work to get something I want, but also delayed gratification. Of all the things I had asked for over the years, that was the ONE thing that I truly wanted. Great lesson.
When did you start teaching your kids about money? What was the first lesson?
Sarah: Teaching my kids about money is actually a part of parenthood that I am always thinking about. I have a daughter who loves shopping but her concept of money is very similar to mine as a kid. I've been taking both kids aside to practice counting coins and adding them up to find the balance of their little savings jar.
One day this fall, we took their money and went toy shopping. We practiced looking at the price of toys on the shelves and checking if their savings were enough to pay for the item. It led to some disappointments when they realized a toy that costs $100 was no where near their budget of $22.00. In the end, they left the store happy with a sensible toy that they had truly earned and a better respect for the cost of a dollar.
Tara: The first lesson I taught my kids is directly from “Money-Smart Kids” by Gail Vaz-Oxlade. Ever since my kids were toddlers, I’ve been careful to make sure that all of my money (change, wallet, cards, even Canadian Tire Money) isn’t out laying around. When I find it laying around, I make a big deal about it. “Oh, look at this quarter I found! Let’s find a safe place to keep this!”. Drawing the kids’ attention to money and its value will be so important for them later in life. They each had piggy banks first, then wallets when they started shopping on their own. Keep that money safe!
What do you think is the most important lesson for kids to learn about money management? How do you instil that lesson in your kids?
Sarah: I think the most important thing to understand at an early age is that we cannot chase every material thing we desire. In the end, we need to measure our needs to our wants and make choices based on proper planning and creating lists of goals/priorities that is open to adjustment over time but creating a structure around the money we save/spend so that we don't fall victim to our own impulses or fears of missing out.
Tara: I think the most important lesson for kids to learn about money management is how to save. It’s something that most people struggle with and it’s no wonder. We are fighting against MASSIVE influences all day every day encouraging us to spend, spend, spend. The good news is, there are some simple things we can do to make it easier on ourselves.
Early on, we set up both savings and chequing accounts for the kids. Every time they receive money – birthdays, holidays, etc. – we sit down with them and talk to them about how much they want to put into their chequing account (that is then available for them to spend) and how much they want to save. We talk about what they would spend their money on now, and what they want to save up for. It was always a great conversation and the bonus for me is I get to learn a lot about them!
What financial pitfalls do you hope your kids avoid?
Sarah: Spending money to keep up with their peer's material definition of success. I hope that they can learn to think for themselves and not become victims to keeping up with the Jones's and that commercialism which only results in perpetual dissatisfaction and debt. Money is a tool that can work for us or control us. I hope they learn to be sensible with money, not too strict but not carefree. I hope they value setting aside money for experiences that will bring them joy with the people that truly matter. I also hope they learn to value their money as a tool to lift an entire community out of poverty and into resource sharing society that provides equal opportunity for all.
Tara: Getting into a house that is too much for them to afford. I made this mistake early in my adult life and it had a devastating effect on my life for over a decade.
Just because the mortgage lender will approve you for a certain amount DOES NOT mean that is the house you can afford.
Before you even start looking for a home, you should have a cash flow plan in place for your pre-house life and your post-house purchase life. Most people are quite surprised by how many additional expenses come up once you’re in a house. You are not just exchanging rent for a mortgage payment. Allocating cash flow for things like insurance, furniture, appliances and future repairs is essential.
If you’re thinking about buying and you’re currently saving up, it’s a good time to talk to a financial planner about how best to do that so when you do get into your beautiful new home, you’re making the most of your investment and don’t end up with more stress and financial strain.
What is one money management technique or lesson that you know now, but wish you knew sooner?
Sarah: That the stress and anxiety of being in a bad financial situation is NEVER worth the short-lived dopamine hits we get from buying items that don't help us in the long run. Once you realize the liberation of financial freedom... it is a glorious sunshine that brings light to countless other aspects in your life. The hard part is facing your fears, understanding your bad habits for what they truly are... and figuring out how to break the cycle and put a full stop on the countless little triggers that would trick you into returning to old habits.
Tara: For me it’s how to save. It seems so simple, and yet it’s so hard!! In the last few years, I have learned a lot about behavioural economics and how the outside world is influencing our money decisions in so many ways. My advice to anyone starting out would be to learn about cash flow and automated savings. This is where we start with all of our clients regardless of how much money they have. Cash flow. For those of you thinking, ugh, budgeting, I say – no! Not budgeting, cash flow planning. There are ways to set yourself up for success so that you don’t feel squeezed, and you actually get the things you really want out of life. It takes a little bit of work to set up in the beginning, but it can be truly transformative.
Any final words of advice?
Teaching kids about money is easier than you think. The best way to instill good money lessons in them is to model those lessons yourself. Think back to the money lessons you learned from your parents and other adults around you. Take the good, leave the bad and keep learning and implementing the new things you learn.
Most importantly, look forward.
You don’t need to know everything or even try and figure it out yourself. It’s good to ask for help and support when you need it. Parenting is joyful, terrifying, painful, and so very rewarding. Know that you’re doing an amazing job!!
Tara Tennant is a Financial Advisor with Assante Financial Management Ltd. The opinions expressed are those of the author and not necessarily those of Assante Financial Management Ltd. Please contact her at (613) 547-1554 or email her at tara.tennant@assante.com to discuss your particular circumstances prior to acting on the information above. Assante Financial Management Ltd. is a member of the Mutual Fund Dealers Association of Canada.
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