Hard, soft money skills important to learn at young age

Teaching your kids to play hockey is a great idea, but the winter holidays are also a good time for them to learn about saving their nickels and using a credit card responsibly.


It’s a good time for parents to build money maturity in children and to instil a positive and healthy attitude around cash.

After all, when is a better time to learn about money management than when shopping and spending peaks during the Christmas and the winter holidays?

According to Investors Group, there are two sets of money skills everyone should learn: Hard and soft.

Hard money skills deal with items such as managing money (budgeting and planning), understanding debt and credit, income (careers and investments) and managing investments (risk vs. reward, own vs. loan, and dollar cost averaging).

Soft money skills involve goals and dreams around money, with the purpose of discussing money and financial issues in a positive and educational manner. We develop our attitudes towards money through the information we receive during childhood and how we interpret that information.

Hands-on experience, 6-12 years old:

•Open a bank account for your children so their allowance can be deposited into their account. Open a second savings account for them as well, where 10 per cent of their allowance is deposited.

12-16 years old:

•Encourage children to review and file their monthly bank account statements.

•Give children increasing responsibility for the use of their money; for example, requiring them to purchase birthday gifts for family members and to budget for “extra” clothes and other goods.

•Teach your children how to develop a simple budget plan and to recognize where their money is being spent.

•Parents should share their life stories with their children, including their favourite charities and their motivation for charitable giving.

•Have your child pick a charity to contribute to on a monthly basis.

16-18 years old:

•Credit card education is useful for older children. Parents can co-sign for a credit card in their child’s name with a low limit or arrange for a prepaid credit card. Children need to understand the importance of paying the credit card balances monthly, to maintain their good credit rating and to avoid high interest rates and late fees.

Parents should monitor the use of the credit card and discuss purchases to determine that the card is being used responsibly and to discuss the evidence of spending patterns shown by the monthly statement. The purpose is to open a discussion on the best way to use their purchasing power.

• Children should begin to file their own income taxes as soon as they have a job that results in a T4. This will help introduce them to the concept of income taxes and it also benefits them in the future by increasing RRSP contribution room.

• Children should begin to increase the sophistication of how they handle their savings by learning about products such as bonds, GICs and mutual funds. They should also be introduced to such concepts as RRSPs, risk and reward, and portfolio diversification.

top five tips children can cash in

1. Money is to be enjoyed.

2. You need to be responsible with your money for it to be there when you want to enjoy it.

3. Don’t try to buy friends by giving them gifts. If they have to be bribed to be your friends, you don’t want them as friends.

4. If you have a debit or credit card, keep it safe and do not share your password with anyone other than your parents. Tell your parents and the bank if it is lost or stolen.

5. Ask your parents to tell you their stories about money management.

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