Saving habits are good habits. As parents and grandparents, we hope for the best that life has to offer our children and grandchildren.
When they were young, we taught them their ABCs, and now that they are older, we should also teach them the ABCs of saving and investing.
Here are some financial strategies that can assist you and positively influence your childrens financial choices:
Be a good role model.
Children are more likely to be good savers if they see their parents (and grandparents) saving regularly. While the goals and objectives of an adult will be different than those of children and teenagers, the important thing is that they see how gratifying it can be to save for financial goals.
Help your children establish financial goals and objectives.
For children, short-term goals could represent saving for a bike, a video game or a computer. Generally, it takes less than a year to reach these goals, and usually less money. Teenagers may have long-term goals that require careful planning and they are usually more expensive, for example, a college education, a car or even starting a new business.
Help your children start saving early and often.
Encouraging your children to start saving as early as possible has many benefits because it becomes habit forming. This has a positive outcome when your children are young and receiving a regular allowance.
Encourage your children (and grandchildren) to establish a budget.
A simple budget can help your teenagers create a snapshot of how they are managing their money. While it is tempting to buy the latest fashion or expensive toys, it is important to be a smart shopper. Buying items on sale and comparison shopping will help keep their expenses down.
Whether you are an adult or a teenager always consider needs versus wants when you shop.
Encourage your child (or grandchild) to open an RRSP when he/she has earned income and a social insurance number.
By starting young, children establish the discipline of regular savings while realizing the maximum benefits of compounding. For example, if a teenager were to contribute $1,000 to an RRSP at age 16 growing at an annual rate of 8% it would be worth $43,427 at the age of 65.
File an income tax return.
To open a RRSP, a child must have filed an income tax return. Filing a return is a good idea because the child builds RRSP contribution room and while the child most likely pays no tax, Canada Customs and Revenue Agency (CCRA) will not know they are building room unless it is reported. The benefit is that they begin building unused contribution room, which can be used in later years when as a teenager or young adult they have more money to put into their RRSP.