Friday, April 23, 2021 / by Mario Daniel Sconza
Making Money-Smart Kids
Enriched Academy founders Kevin Cochran and Jay Seabrook have always been passionate about teaching children and young adults the basics of personal finance. If you don’t believe us, check out Jay and Kevin visiting an elementary school way back in 2016. Their passion has never waned, and we now work with school boards and colleges across the country.
Over the years, we have continuously refined our school programs and compiled a long list of dos and don’ts. Our experience shows the don'ts seem to resonate more with parents, so we asked Kevin and Jay to come up with their all-time best five.
1. Don’t call it an allowance
A weekly allowance starting around age seven is a good idea but be careful –it’s not something that’s received, it’s earned - and children need to know the difference. A checklist of weekly tasks and some "pay" for doing each one is a great way to instill this idea. Reinforce the concept by designating a regular "payday" each week.
2. Don’t assume it’s too difficult
Should you buy stock for a 10-year-old… absolutely! There are plenty of kids whose parents took the time and effort to explain shareholding and how it works. Kids are very familiar with many publicly traded companies like Disney, Roblox, Mattel and McDonalds.
Holding a few shares may not return enough to put them through college, but it will teach them the basics of investing, risk and return for managing their finances in the future.
Rather than prohibiting younger kids from buying something that doesn’t meet your threshold for play value or quality – let them buy it once in a while and learn a lesson about value (see #5).
3. Don’t stop them from buying junk
A mood ring is usually interesting for about a day-and-a-half, and $5 won’t break the bank. If someone learns to better evaluate their purchases in the future
The number one financial problem from young adults to retirees is spending money they don’t have – usually with a high-interest credit card. The need for instant gratification is a never-ending struggle, but building up resistance while still young will help keep it in check during later life.
4. Don’t give an advance on their allowance
For big-ticket items, set up a savings goal and create a tracking chart together with your kids to help visualize
"How much better is an iPhone 12 than an iPhone 10… well, 2 of course!"If your tween wants that latest and greatest must-have item, challenge them to explain the value beyond being new, trendy or fashionable.A 30-speed MTB may impress his friends, but does your 12-year-old need thirty gears to get around the neighbourhood? There is a reason lots of millionaires (and billionaires like Warren Buffett) drive plain cars – it’s all they really need.
5. Don’t talk about cost, talk about value and need
Sandwich shop valued at 7500 times annual sales
The story of a New Jersey delicatessen that recently exceeded $100M in market cap on annual sales of $14,000 is a cautionary tale for investors. If individual stocks from smaller exchanges are part of your investment strategy, you need to do your homework!
700km's north of Vancouver and still unaffordable!
Thinking of packing up city-life for the relative affordability of the countryside? You might need to re-think that plan as housing costs are surging in even the most rural areas of the country.
Credit card interest 101
We all know credit card interest rates are shockingly high, but few of us know exactly how that interest is calculated. Even if you take our advice and pay your balance on time, you should check out this eye-opening look at how credit card interest actually works. Some transactions can rack up interest from day one, so be careful!
Low interest rates helpless against stagnant incomes & inflation
It isn't just houses - gasoline, new cars and just about every item at the grocery store is costing a lot more these days. Despite low interest rates, keeping ahead of rapidly rising prices and taxes on that same old salary is presenting some real challenges.
Schools recognize financial education a critical lifelong skill
The Alberta government recently announced an expansion of a pilot program in Alberta schools to teach financial literacy, including specialized programs for high school students from Enriched Academy! You may also be interested in our free upcoming webinar on How to Raise Money Smart Kids