Friday, October 28, 2022 / by Mario Daniel Sconza
Financial Friday #133: Money Smarts Taught Early Last a Lifetime!
Money Smarts Learned Early Last a Lifetime
It sounds so cliched to say, “make savings a habit” and it really is only half the picture — your teenagers should be saving and INVESTING a portion of their income regardless of how insignificant it may seem. Developing a saving mindset early in life will pay back huge over the course of a lifetime.
Investing will never happen without saving, so kids must learn how and why they need to save and carefully evaluate their spending (needs vs wants) decisions. Your kids also need to understand a little about the markets and the effect of compound returns on growing their investments as well as the relationship between risk and return.
As parents, we do our best, but there are lots of life lessons we need to teach, and personal finance doesn’t always top the list. We may also not be the best equipped to do the job since around half of adult Canadians live paycheque-to-paycheque! Case in point, many well-meaning parents set their kids up with a bank account, but they should actually open two accounts, one for spending and another for saving (just like adults should be doing!).
Credit is another potential disaster for your kids. Poor spending choices combined with easy access to credit cards with excessive spending limits (and high-interest rates compounded daily!) can derail a future before it even gets started. Failing to understand the impact and obligations of a student loan can lead to a nasty surprise when it comes time to repay that money or get a car loan or mortgage down the road. Many parents are quite literally paying the price for their kid’s financial mistakes, and it can continue long after they are no longer children!
One final lesson that our seemingly-computer savvy youth often fail (or simply take for granted) is safeguarding their financial information. Passwords and PIN numbers need to be closely guarded and changed regularly. Young adults also need to be able to detect the proliferation of increasingly sophisticated telephone and online scams.
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