As a parent, any time is a good time to speak to your children about the value of money – certainly not enough is being taught in schools, and children see right through parents who talk about the value in saving money, yet do not have two nickles to rub together at the end of a month (was supposed to be pennies, but Canada no longer uses the penny).
So, when is the perfect time to speak to children about saving for the future? Well RSP season, of course. Some recent statistics came through my inbox from my bank, TD Canada Trust, and I wanted to share them with my readers because they stand out.
While many Canadian parents try to teach their kids the importance of saving for the future, many aren’t following their own advice. According to a recent report from TD, 58% of parents say they talk to their children often (19%) or occasionally (39%) about the importance of saving for retirement, but only 42% say they practice what they preach.
On the other hand, 42% of parents say they rarely (21%) or never (21%) talk to their children about the importance of saving for retirement. One reason that parents may be procrastinating, or hesitant, to talk to their kids is because nearly two-thirds of Canadians (64%) never received retirement savings advice from their own parents.
Kim Parlee a Vice President at TD Wealth Management, offer advice to parents for speaking to kids of all ages about money.
· Taking advantage of teachable times: From creating a grocery list to making a major purchase, there are a range of opportunities to discuss how to create a budget with your child. You can also plan your winter family vacation together and chat about how you plan to save for it. Weaving in lessons and tips at a timely moment such as RSP season is a natural way to begin the conversation about finances and saving.
· Starting small and seeing the bigger picture: Ask your children about the kind of future they want to have and show them how to map out a plan on how to get there. Talk to them about their goals in the short-term (a bike, perhaps), mid-term (education) and long-term (wedding, house, retirement) and explain how different investment and saving products could be better suited to each goal. While you’re at it, make sure you have applied the same principles to your own finances and adult-sized goals!
If, however, your children are teens or already young adults it’s never too late, but you might want to change your approach a little. Consider the following:
· Consulting third parties: There is only so much advice you can offer your children, and it is up to them whether or not they put it to action. Consider asking your advisor to speak with your kids about the importance of starting to invest at an early age, and explain in basic terms the benefits of compound interest.
· Investing in yourself: It’s hard for young people to think about planning ahead when they tend to focus on the present, but teach your children why paying themselves first is important for their future. With teenage children you can focus on education, such as saving for post-secondary education in an RESP, with “automatic transfers” from their allowance or part-time jobs. When your child reaches their young adult years, you can add a new focus of long-term savings. Explain the benefits of a TFSA or RRSP, and encourage them to put some money aside using an automatic transfer every time they get paid so that saving becomes a habit.
So whether or not you are like me and thinking about contributing to a RRSP right at the deadline, or if you max your contributions annually, you should take some time and teach your kids about the benefits of investing, saving, and about money in general. Walk into your bank and see what they have available.
- Toronto-Dominion Bank (TD): This Is The Bank That U.S. Banks Should Try To Be Like (insidermonkey.com)