Financial Literacy: Helping children build financial confidence
Transcript: Financial Literacy - Helping children build financial confidence
Vice President, CIBC Imperial Service
[Music plays in the background]
[Financial Literacy: Helping children build financial confidence]
[David Nicholson stands at the front of the room, audience clapping]
[David Nicholson, Vice-President, CIBC Imperial Service]
Good afternoon, everyone. Financial literacy is one of the most important topics that we can talk to our kids about, and having successful and strong financial habits can really lay the foundation for financial confidence and success in the future.
[By age 7, children form their money habits]
And it's interesting, studies have shown that financial habits can be formed as early as age 7.
[Photograph of David’s kids, Nathan and Kyle]
I'd like to introduce you to my kids. Their names are Nathan and Kyle. They're age 12 and age 10. They're both great kids. They're very different in many ways. But what they have in common is that they've both started to learn about money early.
What my wife and I did a few years ago is we set each of them up with bank accounts and debit cards, for that matter. And what we do is every two weeks we transfer a small amount of money, And what they find really interesting about that is over time they see the amount of money in their bank account grow, and the power of a very small savings amount growing into a larger amount.
So if financial literacy is so important how do we go about teaching our kids?
[More than half of parents don’t consider themselves “very knowledgeable” about: Budgeting 46%, Saving money 44%]
Especially when you consider that roughly half of Canadians say they're not very knowledgeable about what we might consider the basics of savings, budgeting and so forth.
I want to give you three tips for talking to our kids about money.
[Tip #1 – Start early]
The first tip is start early. A lot of parents use the three jars technique, and what that entails is any time your child gets an allowance or birthday money or any other source of funds, they divide it between three jars. A spend jar, a save jar, and a giving jar.
The spend jar is all about that money that we want to spend on those kind of immediate gratification needs. The save jar is saving for something more meaningful in the future. And the giving jar we can really use to start teaching our kids about putting money aside for causes that are important to them. So starting early is key.
[Tip #2 – Teach by example]
The next tip is teaching by example. And what we do is we use examples from our day to day life to start to give the kids an idea of how the world works. So we'll say, you know what Nathan, you know what Kyle, mom and dad get paid every two weeks. Money goes into our bank account and we need to spend that money on different things. So for example there's the food that goes on the table, the day to day necessities. There's your activities and the fun things that we do. And there's saving for the future, for example saving for your college or your university education.
We even start to talk to the kids about borrowing, we say, "You know the house that we live in, we went to the bank and we borrowed money to help us buy the house. And every two weeks we pay a little bit of that money back".
[Tip #3 – Show your kids the value of money]
The third tip is show your kids the value of money and the value of tradeoffs. One of the best ways we found to do that is when the kids are shopping have them bring their debit card, have them bring their own wallet, because then when they see that impulse item they say, "Mom, Dad I really want to buy that thing", we can have the conversation around, well, how much do you really need that, how much do you want it? Will you feel better, two weeks from now when you have less money in your bank account? And I think it's really important that the child makes the decision because then later we can talk to them about it. Hey Nathan, hey Kyle, how did you feel about that candy that you bought? The ten dollar chocolate frog that you bought.
Was it worth the fact that now you look at your bank account balance and it's less than you thought it was. So there you have it, there's three easy ways to talk to your kids about money.
[Three tips for teaching financial literacy: 1. Start early 2. Teach by example 3. Show your kids the value of money]
Starting early, using personal examples as teaching moments, and spending time on the value of money. Now we all have different ideas and philosophies about money. We have different levels of financial expertise, but what we have in common is we can talk to our kids about money and get them started early for a successful financial future. Thanks very much for joining me today.
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