Parents of pre-teens and teenagers will likely be familiar with this scenario: Your 12-year-old child wants to spend the money they've painstakingly saved from birthdays and babysitting gigs on a new video game console.
It’s a teachable money moment, said Angelika Hogan, a program manager for JA Northern Alberta, one chapter of a nation wide non-profit with a mission to help inspire the next generation to realize their potential.
It’s not simply a case of saying yes or no to the purchase of a video game console. After all, it’s your child's money that they've carefully put away.
With some guidance, the purchase can be an exercise in learning the difference between needs and wants, while acknowledging the ripple effects of using all your funds on a single item, said Hogan, who helps run the JA Dollars with Sense program. The program is supported through the TD Ready Commitment, the Bank’s global corporate citizenship platform.
Dollars with Sense helps to educate students in Grades 7 to 9 across Canada about how to build solid money habits that can help them become financially secure as adults.
“A lot of junior high students do not know how to interact with money,” Hogan said.
“They use money, in a debit format or cash they receive from [holidays] or birthdays, but they don’t know how to apply financial literacy skills to make the money work for them.”
In the program, the students learn how to make a budget, avoid impulse purchases, weigh the benefits and risks of online shopping, and calculate the cost of credit — skills their parents may not have the time or the ability to teach them at home.
Parents are worried about their kids’ financial futures
How their children will cope financially in the future is a growing concern for parents in a challenging economy.
Three-in-five Canadian parents say the current economic environment has affected how they have conversations about finances with their kids, according to results from a new survey conducted on behalf of TD.
Sixty-one per cent of Canadian parents surveyed now say they frequently worry about their children's financial future, up from 58% in last year's TD survey.
Parents say they’re concerned about their children’s ability to pay for groceries and rent, which could impact their ability to purchase a home. They also don’t want their children to be saddled with too much debt.
The majority of parents surveyed — 57%— say they expect to support their child financially after they become adults, but 61% say they aren’t confident in their ability to do so.
Even so, encouragingly, the survey shows that more conversations with children about money are happening at home.
More than three quarters of Canadians parents surveyed say they talk to their kids about finances at least once a month, an increase from last year’s survey. But only 36% of parents surveyed felt confident in their child’s financial knowledge.
Tools for building financial literacy
The concerns parents have about their children’s financial future are valid and widespread, said Janice Farrell Jones, SVP, Everyday Banking, Savings and Investing at TD.
“The survey results tell us parents want their children to succeed, but they see their financial support of them into adulthood as an inevitability,” Farrell Jones said.
“Helping kids develop the financial literacy skills they need to make informed decisions can help alleviate some of those concerns from parents."
To assist in teaching the practicalities of effective financial planning, Farrell Jones encourages parents to explore some simple steps such as having open and honest discussions about money, and establishing some realistic and age-appropriate financial goals that they can work with their children to achieve. This might include talking about budgeting, and the benefits of tracking spending. Parents might even want to plan a joint visit with their child to speak with a financial professional at their local bank branch.
“Financial skills are something that evolve as your children grow, get their first jobs, go off to school, move out and start working," Farrell Jones said. "Everyone benefits from having access to knowledge that can empower them to help make smart financial decisions.”
Their knowledge will follow them, as their purchases shift from video games and shoes to furniture, vehicles and homes, and their jobs shift from part time to full time, she said.
Learning to make purchases more thoughtfully
To bolster financial acumen, there are also specific programs designed to help youth and students develop better financial confidence and decision making. In the Dollars with Sense program, students work through modules that can help them learn how to make wise purchases, Hogan said.
A lot of that has to do with unpacking what’s influencing them to buy something. In the program, the examples are relevant to their daily lives, like spending money on lunch.
“I want them to ask themselves: am I really going to Taco Bell today because I feel like Taco Bell? Or is it because [my friend] Sarah is going?” Hogan said.
“We’re encouraging them to make those real-life connections.”
Hogan ran her own son, who is 10, through a similar exercise a few weeks ago when he said he wanted to use his money from his grandmother and his birthday to order $250 shoes online. He had the money ready to go in his bank account.
Hogan walked him through one of the Dollars with Sense modules that showed him how to make a plan, ask questions, and then take action before making a purchase. He had to work through each step before he could click “buy now” on a website.
“I asked him: is this the smartest decision you can make?” she said.
Ultimately, Hogan’s son decided to go into the store to see the shoes and try them on. He also decided to wait until winter was over to buy them, given that he’d outgrow his shoes by the time the snow melted in Edmonton in the spring.
The newest versions of the shoes he wants would be out in the spring, too.
“It only took 15 minutes at home to go through the exercise and that was the impact,” Hogan said. “This kind of exercise really builds a wonderful foundation for when they have more purchasing power.”
The power of investing is the last portion of the program. It introduces the power of compound interest, she said.
“Using calculators, they find out what it takes to get to a million dollars. It’s mind boggling for them to see that putting away [funds] at a young age could set them up in the future," Hogan said. “And they don’t have to put away a lot each month. They could start with $5.”