For many parents, one of the most challenging financial conversations they have is the one they have with their own children.
Teaching kids about money can be a difficult task for some parents. According to a 2017 TD survey, more than nine in 10 Canadian parents (94 per cent) said they are the biggest influence on the development of their children's money skills, but nearly one-third (31 per cent) said they find it hard to broach the subject.
Complicating matters, many Canadian families are facing financial hardships right now. Some parents have been forced to change their spending habits or cut back on certain things around the home, while explaining to their children why those changes are happening and how money plays a major role in their lifestyle and spending habits.
So, to help parents teach their kids about money, we spoke with a pair of senior TD financial advisors about some tips for discussing family finances with your children.
Be open and honest
Even at the best of times, it's not always easy to say no when your kids ask for things, whether it's a new video game or a paid app for their phone.
"You shouldn't be afraid to be open and honest with your kids when it comes to money," said Kathy Morin, a senior financial advisor for TD in Hamilton, Ontario.
Talk to your kids about the difference between "needs" (the must-haves for survival, like a place to live and food to eat) and "wants" (the nice-to-haves, like going out to eat, cool new sneakers and pricey toys). You should explain that it's important for a family to prioritize paying for needs first.
"Kids are very intuitive and they know when something is wrong," said Pamela Byron, a senior TD financial advisor in Simcoe, Ontario. "If your family's financial situation has changed, talk truthfully to your kids without going into great detail and let them know that your spending habits may need to change."
If your child points out something they would like to purchase, show them how to price compare to help save money. Suggest looking out for upcoming sales for that item, or to check for deals at another retailer.
Emphasize the importance of saving
It's never too early to start teaching your kids about money and finances, and educating them on the importance of saving as a skill that can have lifelong financial benefits.
If you're able to provide your children an allowance or if your child is old enough to hold a part-time job, you can use whatever cashflow they have coming in to teach them about saving by reminding them to put aside a portion of money each time they receive payment.
Whether they choose to save 30, 40 or even 50 per cent, encouraging them to develop the habit of saving is an important lesson for kids to build and maintain financial health.
For younger children, it may be useful to make the act of saving more visual. For instance, you can use an empty jar or piggy bank and drop in the cash. When your child receives money for special occasions or their allowance, get them to add some of the money received into the jar or piggy bank as well. This way, your child can begin to understand how money accumulates when it's saved, rather than spent.
To further instill the habit of saving, consider depositing the money they have accumulated into a savings account that you open just for your child. If the savings account earns interest, your child can see how their money can grow.
As your child deposits more money into their account, they can also learn how to save towards short-term goals – like buying a bike or their choice of cool new sneakers, or towards longer-term goals such as attending college or university in the future.
Keep the conversation age appropriate
You should consider the type of conversation to have with your kids depending on how old they are.
"While younger kids may not understand everything that's happening, they may be picking up that things are different lately," Byron said.
"Just remember that kids are resilient," said Byron. "It's our responsibility as parents to help them understand that we're doing our best to keep them safe and healthy."
It's never too early to start talking to your kids about how to manage money.
For additional tips on how to help kids develop healthy financial habits, visit the TD Smart Money Parental Toolkit – an online resource for parents to browse by a child's age, and learn about developmental money milestones for each age group.