Parents have  a lot of influence in their children's lives. They can help their children in many ways, including providing support and guidance, setting limits, and teaching them new skills.

 

Parental involvement can make a big difference in a child's life. Studies have shown that children whose parents are involved in their education tend to do better in school than those without as much support.

 

Being there to guide your child impacts the course of their whole lives. If you are a parent, you have an amazing opportunity to help your kids grow into the best version of themselves.

 

The problem is, too many children enter adulthood abruptly lacking essential skills they need to thrive as adults: saving, investing, budgeting, choosing the right education & career path, and of course, using real estate to build wealth.

 

Here are 6 Financial Skills Your Children Need to Learn.

  

 

Saving

One of the first lessons to teach your children is the importance of saving. Saving is critical for anyone who wants to be financially successful. The earlier your children learn to save, the better off they'll be.

 

One way to encourage saving is to start first with a piggy bank early on, then open a savings account for them and help them deposit money into it. You can teach them to save by setting aside a portion of their allowance or earnings from odd jobs. Encourage your children to make saving a priority by using positive phrases, and regularly state how good it is to save.

 

And you should also let your kids know that once they are 18 years old, they can contribute to a Tax Free Savings Account, or TFSA. These accounts mean they only pay taxes when they actually earn the income, and they aren't charged when the money is taken out, even when you make money with them.

 

Investing

Next, saving goes hand in hand with investing. When your kids are younger, we can teach them about compound interest really simply.

 

The lesson can be simple for kids under 10. Put a $10 bill in their piggy bank. Tell them if they don't touch this money, it will grow by 10% a month. This with help reinforce  the power of compound interest and how leaving money untouched can make it grow.

 

When kids get older, show them a compound interest calculator which can be found easily online, so they can see the incredible power of investing and compound interest.

 

Here's a compound interest calculator: https://www.getsmarteraboutmoney.ca/calculators/compound-interest-calculator/

Budgeting

So, you've taught your kids how to save their money, and how they can grow it. But life will always have expenses. So, they'll need to learn how to budget the money they earn.

 

Kids around 8 years old are typically ready to get the basics of budgeting. You can start at this age first by teaching them the difference between wants and needs.

 

Then you can have them draw a little pie graph, with the pie representing all the savings they've earned from chores. Different pieces of the pie will represent where the money will go; Either saved or spent.

 

As they get older into their teens, you can expand upon this simple chart and have them break things down in much more detail. They could even start covering some of their own expenses.

Education & Career

Next, let's talk about education from several perspectives. First, let's talk about support. As mentioned before, kids who receive more help from their parents in elementary school tend to have higher marks, which have positive ripples throughout their lives.

 

Reinforcing good study habits earn leads to better results in high school, which really is a major stepping stone to your children's life path. Now, let's talk about post-secondary education. Let's be blunt: There is a near-endless supply of awful college and university programs and degrees out there.

 

Millions of people each year choose bad programs, and put themselves into insane debt for essentially worthless degrees. In Canada, students currently have around $18 billions dollars in student debt. In the US, that number is an astounding $1.73 trillion dollars of student debt. Individually, this can take decades to pay off.

 

Debt is a trap that is extremely tough to get out of, especially when your career path isn't lucrative and job opportunities are scarce. Discussing education and career path are some of the most important financial chats you can have with your children, since they impact both student debt, and future earnings.

 

Real Estate: Homeownership & Investing

Finally, let's look at Real Estate. You may be wondering how understanding real estate is a financial skill to teach your children. Good question!

 

For most people, their home is where the majority of their wealth is held. It is also an appreciating asset, which means it will go up in value over time. If you own a home, teaching your children about mortgages, home equity, and real estate investing can be extremely beneficial to them financially.

 

If you don't own a home, that's ok! You can still teach your children about how homeownership works and the benefits of owning a home. You could even discuss strategies for investing when they're older, like using the BRRRR method.

 

No matter your situation, teaching your children about real estate is a great way to help them develop strong financial skills. Using previous skills like saving, investing and budgeting, will allow them to save up for the down payment faster.

 

 

Saving, investing, budgeting, choosing the right education and career path, and using real estate are some important financial topics and skills your children will need in life. Financial literacy will give them a huge boost as they grow up, leading to finacially responsible, and knowledgable children.