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How to Talk to Your Kids About Financial Literacy- When You Don’t
Know What You’re Talking About
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| Don’t keep your kids in the dark about your finances- even if you’re
in the red. Being open about mistakes, missed opportunities, or simply
the reality of not having enough to go around teaches kids to solve
problems instead of copying them. Jorge Ramos is a certified financial
educator and wealth consultant for BMO Harris Private Banking. He’s also
the founder of Financial Intelligence (www.financialiq.ca), and the man
who brought Camp Millionaire to Canada. |
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| Financial IQ helps kids through adults learn about financial
literacy, from the basics to the finer points of expert wisdom. Summer
camps empower 9 to 14 year olds to become the CEO of their own lives,
teaching them through games, activities and field trips to banks,
businesses, and stock brokerages. I talked to this dynamic innovator to
pick up some expert advice on how to teach our kids about money, even if
we don’t exactly have much wealth- or wealth of knowledge. |
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What are the easiest ways for parents to get kids interested in
managing money?
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| Jorge Ramos: Kids learn through fun and games. Make it engaging and
entertaining. Empower kids by allowing them to make financial decisions
that affect their lives. Give them a budget and specific items that they
have to buy: running shoes, clothes, books, lunch money. Now you turn it
into a game. Decide with them what things on the list are Needs and
which things are Wants. |
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| Give them enough money to buy all of those items, both mandatory and
optional. Tell them to keep any money that they can save in buying these
items. That becomes their allowance. You’ll find that kids will learn to
shop around and get creative in how to save money. Quickly, they will
learn how to manage money and learn the difference between Needs and
Wants – a distinction that most adults struggle with. |
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How can parents with major money messes teach their kids important
skills if they aren’t exactly a shining example?
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| It is not our level of knowledge or past experience alone that
dictates what we can teach our kids. Our kids also learn from how we
deal with our mistakes and our attitude towards failure. |
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| It is quite easy to be bitter and have negative views towards money
when you are laden with financial difficulties. Then we pass these
negative sentiments around money to our kids. |
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| For example, your child comes to you and asks for the latest video
game. Struggling with debt and knowing you can’t afford it, you snap,
“No, you can’t have it. Do you think money grows on trees?” You just
created a negative association to money and taught nothing. |
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| Say instead, “We can’t afford that right now, but why don’t you
think of some ways that you can earn that money.” Now the child has to
shift gears and think about what they are willing to do to get that game
and decide how badly they want it. If they really want it, you bet they
will come back to you with some suggestions. This child is learning to
decide what is really important to them, the connection between effort
and reward, the value of things and to be creative. |
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Should a financially struggling family take a different approach in
teaching their kids than a rich family?
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| The same lessons apply whether you are rich or poor: the degree of
application might differ, but the learning remains the same. |
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| There are many other basic lessons around money that both rich kids
and poor kids need to learn: bank accounts, credit cards, credit scores,
good debt vs. bad debt, assets and liabilities, compound vs. simple
interest, business owner vs. self employed, and more. Remember, in
wealthy families it is the parents that are wealthy: the kids still have
their money training wheels on until they are properly exposed to the
lessons. It is wrong to assume that these kids should know more just
because they come from a rich family. |
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What are common excuses or obstacles to financial literacy in
families, and how can we best overcome them?
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| “I was never taught this, so I wouldn’t know what to teach my
kids.” |
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| Teaching about money doesn’t have to be scary, it’s what we all do
everyday, it’s life. Involve your kids in your money decisions. Whether
your next family trip is going to Europe or camping, involve them in the
planning and have them think of creative ways to do more with the
budget. |
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| “They are too young to learn this stuff.” |
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| Too often we underestimate the learning ability of our kids. Kids
learn best when they are challenged and entertained. Learning about
money doesn’t have to be boring or just about math. It can be fun and
relevant. The sooner we can put our kids on the right path to making
proper financial decisions, the better their chances will be of
succeeding in life. |
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| A good start for children as young as three is to get them three
piggy banks labelled Savings, Fun and Giving. Tell them that whenever
they get money (birthdays or from Grandma) they have to put some into
each jar. This teaches them that money has money uses and gets them into
the habit of saving. |
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| “They’ll figure it out themselves when they are older, I did.” |
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| We all want the best for our kids. That’s why we put them in soccer,
ballet, hockey, music, and more. We get them tutors and help them with
their homework. We hire someone to teach our kids to drive. We do all
these things because we consider it important to expose our kids to many
different activities. We have to make learning about money just as
important. Financially literate kids don’t just manage money well- they
gain the confidence and ability to do anything. Your kids are ready to
learn. Are you ready to teach? |
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| Visit Jorge Ramos, CFP, CLU, CFE at
www.financialiq.ca. |
| 416-567-3177 |
