Start your teen off right and help them prepare for as smooth a financial road ahead as possible.

Needs vs. Wants

Tweens and teens need to learn to differentiate between needs and wants and to prioritize how they spend their money.  Value and cost are two more important concepts they need to understand.  A top-of-the-line cell phone or a carbon fiber mountain bike may really impress, but a cheaper versions may perform similarly and provide more value.  Bombarded by marketing messages, teens need to learn how to stay objective. Even billionaires like Warren Buffett drive basic vehicles and live in modest homes.   If your teen or tween wants the latest and greatest must-have item, challenge them to explain the value beyond items being new, trendy, or fashionable.  When they want to buy something, encourage your teen to research, read reviews, and compare prices to make informed decisions.

Introduce Basic Investing Concepts

Introduce your teens to basic investing and the concept of how to make money with money.  Explain how investments can grow over time and the power of compound interest.  Should you buy a stock (or an ETF, GIC, mutual fund or some other financial product) for a 14-year-old? Absolutely!

Kids are familiar with many publicly traded companies like Disney, Roblox, Mattel and McDonalds.  Holding a few shares (in an informal trust account or simply in your name) may not return enough to put them through university, but it will teach them a few of the basics around investing, risk, and return for managing finances in the future.  Developing an investing mindset pays huge dividends over the course of a lifetime and helps underpin long-term financial security.  As soon as your kids turn 18, have them open a tax-free savings account (TFSA), even if they can only muster $50 or $100 monthly to contribute.

Credit and Debt

First-year post-secondary students are often able to get a credit card.  Responsible use of this first credit card can help establish a credit score and is very convenient.  They’re also a necessity for many online transactions.   However, cautioning about high interest and poorly planned expenses will be imperative from the start.

Federally issued Canada Student Loans are interest-free but provincial loans may still carry interest. Either way, explaining repayment of student loans at the outset is imperative as well.

Financial education is ongoing.  Encouraging openness about money and creating an environment where your teen feels comfortable discussing money matters with you is key.  Instilling sound money habits early as they develop their financial skills will help them eventually grow into financially responsible adults.

Adapted from DLC Marketing

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