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Financially literate kids require early efforts by parents, experts say

TORONTO — Financial literary expert Laurie Campbell experienced first-hand the embarrassment that many parents fear after she told her young son how much money she made.

TORONTO — Financial literary expert Laurie Campbell experienced first-hand the embarrassment that many parents fear after she told her young son how much money she made.

The disclosure was meant to be part of a larger discussion about saving, expenses and the cost of living, but the 10-year-old dashed out of the house and blurted out the sum to a friend before asking how much his mom earned.

The experience is one of the reasons many parents are reluctant to be honest with children about such a personal detail.

While the decision to disclose income is a personal choice and depends on the age and maturity of the child, Campbell thinks people need to start opening up more about money.

"Money is such a taboo subject," the director of client financial wellness at Bromwich and Smith, said in an interview.

But parents need to start the conversation with their children at an early age to help them understand how to make decisions about needs versus wants that will be useful their entire lives.

"It's so important to teach our children the building blocks of financial independence so we help them avoid the heartaches and the hardships that maybe we've had to experience because of our blunders and mistakes," Campbell said, adding that it takes time to pass along good habits.

She suggests starting at an early age by taking children to the grocery store, eventually opening a bank account for them and ultimately discussing credit cards, mortgages and the perils of debt. An allowance for completing extra chores beyond making their bed or cleaning their rooms is also worth considering.

Expand the conversation when they hit their mid-teens, she said, and have a fuller understanding about money in order to raise them as a financially astute and independent adult.

"You don't want them living in your basement forever," she joked.

Campbell cautions parents to first look at their own financial situation because many Canadians haven't been the most diligent at spending wisely, saving appropriately and sharing what they have left.

Nonetheless, a 2020 survey by the Organization for Economic Co-operation and Developmentof 15-year-old students found that Canada ranked second, tied with Finland, out of 20 participating countries about financial literacy. 

More than 90 per cent of students had at least the minimum level of financial literacy required to participate fully in modern society. And 44 per cent of Canadian students performed tasks associated with advanced levels of financial literacy.

The triennial global survey found that teens who talked about finances with their parents, even just once a week, scored 33 points higher in financial literacy than those who did not.

Several provinces have introduced financial literacy classes in school but parents have an integral role in teaching about this subject.

With COVID-19 affecting household finances, the Financial Consumer Agency of Canada suggests that parents involve their children in conversations about news related to finances and how the family is responding financially to these unprecedented circumstances.

The head of advocacy group Canadian Foundation for Economic Education says one of the biggest mistakes a parent can make is not teaching their kids about money at all.

"A lot of parents seem to be reticent about doing so because they tend to lack the confidence in themselves and they don't feel they've had the background and maybe made mistakes in their lives too," said Gary Rabbior.

"If you've made mistakes, that's probably put you in the position of being one of the best teachers."

Starting at an early age is better than waiting until they're in high school and have already developed certain attitudes and behaviours about money.

"If they aren't what you'd like them to be, it's a lot harder to change than if you start early and develop them."

Rabbior said it's key to teach kids that every financial decision involves a trade-off — buy now or save for the future.

That doesn't mean preventing kids from all instant gratification, but restrict it to situations where the consequences aren't too great. Let them learn by making mistakes such as purchasing the toy they'd been dying to have but stop playing with after just a few days.

"Hopefully that instils a sense in a kid that it's appropriate to give more thoughtful consideration to your money decisions."

One of the biggest challenges parents face these days is social media, where a child's perceptions about money is warped by so-called influencers. It prompts some kids to elevate their own situations on the internet to make them appear better off than they are. It also makes other kids feel worse.

"Kids' perception of themselves, what they value, how they are compared to others, that is probably one of the biggest factors at risk among kids today," Rabbior said.

"So we try to impress upon parents that what you're doing here is not just teaching kids about coins and dollars and credit cards and things like that. You're actually trying to build the foundation for staying in control of your life, living within your means, making good decisions that ultimately will have an impact on happiness and good mental health of your child as they get older."

This report by The Canadian Press was first published Aug. 5, 2021.

Ross Marowits, The Canadian Press