As kids prepare for school, it’s a great time to educate them on handling money responsibly. Of course, the lessons they need to learn will depend on their age and other circumstances, but everyone can benefit from tips on managing money.
Good habits start early
Although kids in elementary school don’t have significant expenses, it’s still valuable to learn financial responsibility. Sit down with them and figure out what they may need for the school year. Take note of their “wish list” and let them express their views without judgment.
Provide a reasonable budget and help them estimate the cost of each item on their list. If the total cost exceeds your budget, that’s where the financial lessons begin. Help them prioritize and make other adjustments. For instance, if they want a new bike and two pairs of running shoes, maybe they can defer buying the bike (or get a less-expensive model) and make do with one pair of new shoes for now.
Work with your child until the budget is met. Whether the shopping is done online or in person, involve them in the process so they can help decide on the specific items, confirm the costs and watch how each purchase draws down on the overall budget.
The high school years
This age group is more challenging. High school students have broader needs than the little ones, and they may push back on curbing expenses, especially if they earn their own money from part-time jobs (or full-time summer work).
You still need to guide them but they’re approaching adulthood and deserve more freedom to make financial decisions. Encourage them to save a portion of any income to build a foundation for their future, while also having money for personal use. It’s all about achieving a sensible balance of spending and saving.
As with younger kids, you can work with teens to create a budget for the school year and decide what items they may need or want. Teach them about setting priorities and making the effort to comparison shop and seek out sales. Getting the best deals possible and maximizing budget dollars is a lifelong skill.
If you’re still over budget, see if your child will contribute some of their savings (allowance, birthday money, work earnings, etc.). It may underscore the notion of mindful spending and how every item comes at a cost. Also, if they spend their own money, they might be more careful (e.g., not damaging or losing certain items).
Post-secondary students
Now it gets complicated, particularly if your child is going away for school. On top of paying for lodging and food, expenses may also include school-related supplies, electronic devices (for class and personal use), furnishings, transportation (public transit or their own vehicle), insurance and utility bills, clothing, personal items and entertainment. Did we mention tuition? That’s a lot of money!
In anticipation of these expenses, you may want to encourage your child to research government grants and scholarships. Involve them in this search, and have them assess the qualifications and complete the applications. If your child has earned money throughout high school, you can also let them know that they will be responsible to cover some of their own expenses. This may also be a good time to provide your child with their first credit card. Using a credit card responsibly not only helps meet expenses, but it’s a great learning tool for good money management.
Since their expenses are greater than younger kids, they’ll need a detailed budget and more “balance sheet” accounting of what they earn and spend. Teach them to review their budget carefully and regularly (perhaps each month) keep their finances from heading off the rails.
If they can work part time during school, having a steady cash flow – even a modest amount – will help pay bills and reinforce financial responsibility. Managing money is difficult, so be available to answer their questions, have them learn more on their own and encourage them to seek financial counselling if their school offers it. The money lessons they learn now will benefit them in the future.
To find out more about how we can build a suitable investment plan based on your needs and help you – and your children – budget for the school year, please contact us today.
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The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This content was prepared by Sunrise Wealth Management a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this presentation comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability.