Why parents should teach their kids financial literacy

(NC) One of the earliest memories many children have is selecting their favourite book to have a parent read to them before bed. As a parent, you certainly remember the joy of watching them join in and read along with you. You may also feel a pang of sadness from when your child told you that it was okay, they can read to themselves. But as important as written literacy is for parents to pass along to their kids, so too is financial literacy.

Financial literacy is a person’s overall knowledge and understanding of finances. We use our financial literacy skills every day, usually without thinking about it as we pay our bills, balance our budgets, plan for retirement and more.

As your child grows and develops a deeper understanding of the world around them, seek out opportunities to strengthen their financial literacy. Even at an early age, they’ll likely start to accumulate some birthday or chores money. Explain to them how they have some choices on how to spend that money: use it for instant rewards like buying candy or a small toy, save the money up for a larger coveted item, or use it for a mix of short- and long-term rewards.

When they’re ready to start their first job, help them open a bank account and they’ll see first-hand how interest works. If you open a children’s account for them, they’ll also avoid most of the services fees and charges that most regular accounts incur.

As they get a bit older and are off spending their own money in stores or online, teach them the signs to watch for scams and other ways people will try to rip them off.

One of the most common ways parents save for their children’s future is through a Registered Education Savings Plan (RESP). If you have an RESP - or are considering opening one - this is a great opportunity to discuss important concepts like compound growth, and saving for an important priority. Plus, just engaging them in the discussion helps affirm to them the value you place on higher education for them, and the importance of saving for this future expense.

Learn more about education savings options at cst.org.