Family values & money lessons for teens

From Yahoo Finance : The majority of Canadian teens find parents and guardians to be the most inspiring when it comes to learning about finances but with household debt on the rise, parents may need to brush up on their own financial literacy to prep their teens for the road ahead. Six-in-ten Canadians between 12 and 17 say they prefer to learn about money at home, according to a recent survey of 6,000 by the Canadian Foundation for Economic Education.

Meanwhile, 54 per cent say they’d like to learn about finances in school and about 42 per cent say their preference is to get financial advice from guest speakers and experts at school. “Young people are learning from their parents predominantly,” explains Adam Fair, director of programs at Prosper Canada, a charity focused on alleviating poverty through financial empowerment. “So it’s a great opportunity for parents to think about how they are more actively building these skills.” According to the survey, a chief concern among teens is learning how to manage their money well and not waste it (66 per cent) while 66 per cent say they want to learn how to save and 56 per cent want to learn about a career that will help them earn money.

For many parents, the teenaged years – when their kid is bringing home their first paycheque, starting to think about saving for school or making that first big purchase like a cellphone – creates an ideal environment to introduce financial concepts. “It’s an opportunity to talk about how they might (open) up a bank account… how they might budget that new income in order to pay not only for their daily needs and wants but start thinking long-term goals,” says Fair. “For large expenses like a new phone, maybe there’s an opportunity to match their savings so that you can encourage them and motivate them to put money aside.” And with the average Canadian non-mortgage household debt sitting around $21,686 in the third quarter, up 2.3 per cent from last year at the same time, talking credit to your teen is critical, especially as they near 18, the age at which they can get their first credit card. Fair points out that credit cards are ubiquitous, especially in places like college or university campuses where companies are trying to sign new students up for their first dose of credit. It opens the doorway for parents to talk about what credit cards and credit scores are. “And building long-term credit which is useful for getting loans or getting an apartment,” says Fair. “But they can also be really dangerous if you’re living beyond your means and spending more than you’re making.” Which, in turn, can lead to longer-term consequences with respect to their credit scores.

With debt and credit cards, it helps if parents are transparent and provide some real world examples, says CEO of (Amber Financial l, a Vancouver FinTech startup and borrowing platform. “As a parent, when you pay with a credit card in your child’s presence, point out that it is borrowed money and demonstrate how compounding works against them when you carry a balance,” says Cindy. “Show your teen your bill, the minimum payment and how much it will cost in the long run if you only pay the minimum.” Debt management is a critical skill, she adds, one that will pay off down the road as teenagers look to juggle short-term credit through their credit cards and any student loans they might need. “It is important to guide your teen through the experience of borrowing money in an educated and responsible way before they have to do it themselves,” says Cindy. “Without a clear understanding of all the options and risks of borrowing money, it is easy to get buried under a mountain of debt at a very young age.”