Children as young as five can grasp basic financial concepts
TORONTO, ONTARIO–(Marketwired – April 27, 2013) – Following the inaugural Canadian Foundation for Economic Education’s (CFEE) Talk With Our Kids About Money Day – a Canada-wide initiative designed to help young Canadians learn more about money and personal finances – BMO reminds parents that they can give their children a head-start on investing and saving by introducing them to the world of finance at an early age.
“The sooner parents start talking to their kids about money, the better prepared they will be when they start saving and investing for their future,” said Serge Pépin, Vice President, Investment Strategy, BMO Asset Management. “Even very young children can benefit from learning basic investing skills and the importance of setting financial goals.”
Mr. Pépin noted that having the “money talk” has many benefits for children, including:
- Building Wealth: Investing is one of the best ways to amass wealth, particularly over a long-term horizon. While many parents know this, it is important that they teach their children about investing and ways they can begin building their own wealth.
- Financial Freedom: By getting kids interested in investing, they learn lifelong financial skills that will help put them on a long-term path to financial independence.
- Skills Development: As children become more aware of money and other financial concepts, they become armed with important investment knowledge. This is especially beneficial when they begin investing on their own; for instance, they may be more comfortable riding out market fluctuations and making informed decisions when others may panic.
BMO offers the following tips to help parents open the discussion about money and investing:
Start Early: Give a young child a piggy bank and explain why people save and why every nickel matters. When they start school, introduce them to simple investment terms and discuss stock market basics. As they mature, begin investing in real companies with real money and discuss their progress together.
Partner Up: As your child gets older, consider setting up a custodial account and having him/her contribute part of their savings, and perhaps offer to match any contributions the child makes. The act of investing will help them learn how to make real decisions and take real risks down the road.
Make It a Habit: Continuous learning helps children digest information more easily and lets them know that it is okay to talk about money and finances. Build conversations about saving and investing into daily interaction, such as during dinner or on the way to school.
Keep It Personal: Make the conversation age-specific and use examples that resonate. For example:
- Ages 5 to 9 – Explain the difference between short- and long-term financial goals, and focus on a specific goal such as a buying a video game or a bicycle. Suggest they save part of the money they receive for birthdays, holidays or chores for something they really want.
- Ages 10 to 13 – Show them how to read stock prices in the financial pages of the newspaper or online, and have them track familiar companies such as Tim Hortons or Apple to make it more interesting and personal. Introduce concepts such as risk and balanced portfolios.
- Over 14 – Encourage teenagers to invest on their own, with parental support and guidance. Teach them how Registered Education Savings Plans, Registered Retirement Savings Plans and Tax-Free Savings Accounts can impact their future and emphasize the importance of starting to invest in these savings vehicles early on.
Talk With Our Kids About Money Day, launched on April 17th, 2013 in schools in the Greater Toronto Area and Montreal, is an initiative of CFEE in partnership with BMO Financial Group. Designed to help young Canadians learn more about money and personal finances, Talk With Our Kids About Money features a “Home Program” for families and a “School Program” for students and teachers. The material provided is designed to support provincial governments’ desire to integrate financial education into the curriculum and can be used by teachers throughout the school year. The program will be rolled out to other provinces in 2014.
For more information on Talk With Our Kids About Money, visitwww.talkwithourkidsaboutmoney.com or visit a BMO Bank of Montreal branch.