Mother’s Day took on a whole new meaning for me in 2012. In ecstasy as soon as I woke up in front of the sweetness and beauty of my son, I then understood that it would be the first time that I was going to be just as honored as my wonderful mom (the best!). I received flowers, wine and gifts; enough to make me immediately adopt the said celebration! Being a mother, at least in my household, has since meant constantly answering questions. For all the moms (and all the parents) who fulfill this role, I therefore thought of sharing a few words from children, carefully noted in my notebook. Because, yes, children sometimes talk about money.
But what do children wonder about finances?
Before writing my first column last year, I had polled Téo and Éloi, then aged 9 and 7, on what they thought were good questions to address in order to help readers of the To have to. Here is what they spontaneously asked me (these are their full words):
“What is the value of money?” The difference in the value of money between countries?
“What’s the point of keeping money and not spending it all right away?”
“What’s the point of having accounts in different banks?”
— Why do people spend their money and not “collect” it?
— How long does it take to pay off a mortgage? Is yours fully refunded?
Their questions surprised me; they were much more technical than I would have imagined. As a professional in the financial field, I am of course well equipped to answer. I made the choice to give them a lot of information, which of course generated many sub-questions… For example, I explained to them that the value of a currency depends on several factors, including supply and demand for our country’s products and services, prevailing interest rates, economic conditions compared to other countries. Since children like concrete examples, this type of explanation could be accompanied by the calculation in Canadian dollars of the cost of a dinner at a restaurant as part of a trip to Europe.
The reference to “collecting” money is totally adorable. My kids still don’t understand why we have a limited budget. I then explained to them, and I often repeat the importance of financial education, both at school and among adults, that not everyone is lucky enough to have the personalized advice of a financial planner. As a mother, I constantly hammer home the message never to trust appearances: it is quite possible to look “rich” just by being in debt and, on the contrary, that diligent savers are not always those with the biggest incomes (although it helps, let’s not be naive either).
So, if they are already looking forward to working for pocket money, we have often discussed that they will also have to set savings goals for part of their income.
Some tips for financial education
These questions also prove that no matter their age, children have the capacity to be interested in finances. As a financial planner, I sometimes hear parents sighing that their offspring are spending lavishly, or that it is “expensive”. This relationship to money is however not innate or biological… Children should be made aware of the value of work and savings by their role models. So the challenge as parents — one more, it’s true — is to find the balance between talking about finances with them, without passing on our financial concerns to them, if that’s the case, or talking too much about it.
Just as with marital discussions about finances, your discussions on the subject with your children should be based on an emotionally detached approach. I don’t think there is a minimum age to start this conversation, you just have to adapt the level of language and the examples given to the answers. The important thing is to sow the seed of financial responsibility early. Here are some keys.
The famous piggy bank. She still works with children. This is a very concrete way of transmitting to them the management of the accumulation of money rather than spending on non-durable material goods or the famous sweets! However, this gesture must be accompanied at some point by the counting of the contents of the “treasury” and the opening of a bank or investment account.
Open an RESP. It is for your children an unbeatable gift and accessible to all families. You could deposit your children’s savings there and gradually educate them on the growth of their investments. You can open an RESP they have access to and keep a bigger one they wouldn’t know existed, if you’re not the open game type.
Learn to say no. The consumer society we live in puts a lot of pressure on us to invite us to spend, but you must remember that saying no to an expense or following your budget is the right example to set, even if your parent’s heart want the opposite. Children must grow old understanding that certain desires must be postponed.
Get informed and inform them. Financial literacy and education tools are increasingly available online. If, as parents, you know that your financial knowledge is limited, you will be a wonderful example by surrounding yourself with professionals and seeking advice. For example, you could take a financial literacy course online, and with your family!
Take them with you. Children are always welcome at our firm, perhaps this is the case with your privileged adviser. Talking openly about your financial decisions and your savings in front of your children and presenting the family budget to them (from a certain age) can only anchor the importance of discussing money.
We will return in a future column to these family conversations surrounding finances. For the record, I did not answer the last question from my children. What do you think ?