Financial Education: Why Is It so Important?

Managing one’s finances is an integral part of adult life. Yet, it is often the precise area in which we are the least prepared when we leave the nest. We certainly can learn by doing when we find ourselves in a sink-or-swim scenario, but with great difficulty. It is, however, possible to employ a gentler method by which we prepare and avail ourselves ahead of time of the tools we’ll need to manage our budget. Being financially sound allows us to start our adult life off with a solid foundation. Financial education is therefore important for people of all ages, but particularly for the young.

Financial Education for the Young: an Investment for the Future

The Role of Parents in the Financial Education of Their Kids

As parents, our role is to teach our children to become responsible adults and to instill in them the values that are dear to us. Our mission is to prepare them to deal with all the various aspects of life, good or bad. But our work doesn’t end there! We also have the duty of helping them to understand the world of economics so that they know how to manage their money and become intelligent and informed consumers.

Transmitting economical and financial notions to our children can take different forms depending on our educational style and our values, but also and most importantly, on the age of the child. This could be done by playing certain board games with them, or by giving them the responsibility of making specific basic purchases (going to the store on their own to buy a beverage, for example). You could also give them an allowance that they must learn to manage, or even a maximum amount for them to spend when out shopping.

There are certain options that can be put in place immediately to hone your child’s instincts regarding money matters in order to give them some experience handling money, and to help them become aware of its value. Here are a few examples:

• give them a piggy bank

Once your child starts primary school and begins learning to count, give them a piggy bank. There are bound to be numerous occasions on which your child will come across or receive a few coins. Teaching them to put the coins in their piggy bank and watch their nest egg grow is an excellent way to teach them the basic notions of saving money.

• open a bank account in their name

Occasions like birthdays or New Year’s day can often be a source of money for your child. Teach them not to spend it all frivolously, and to save. Instill the reflex in them to put their money in their bank account and show them the statements after every deposit. That way, they will experience the pleasure of seeing their finances grow over the course of months or years, and once again, they will develop the desire to economize.

• learn to say “no”

When out shopping, temptation is strong. As difficult as it can be to refuse your child certain things, it is important for them that you don’t give in as it will help them come to understand that it’s not possible to have everything in life.

• let them make their own purchases

You could also let them buy what they desire. It’s a way for them not only to learn to compare prices and to make choices that are within their means, but also to discover the feeling of satisfaction that comes from the newfound autonomy that their savings has given them. Making their own purchases also familiarizes them with the notion of sales tax, which is not necessarily obvious to an inexperienced teenager.

By engendering these habits in your child, they will have a strong foundation for the future. Their relation to money will develop progressively and smoothly, and they’ll come to have a better understanding of the limits imposed by a budget, and of the financial realities of life.

School Does Its Part

Financial education courses are now offered to high school students. This rather recent initiative (2017) by the educational system is testament to its willingness to adequately equip the youth in the area of finances and to train them to ask the right questions regarding money: how to earn it, and especially, how to spend it wisely and how to invest it.

The courses focus on themes like saving money, the consequences of indebtedness and over-indebtedness, using credit cards, and even income tax. The goal of these courses is to help teenagers to become financially responsible adults in terms of money management.

These financial education courses, intended for secondary 5 students, are given a little too late in the high school process, however. This underlines the importance of addressing these topics at home. Family discussions and real-life scenarios provide concrete examples that illustrate academic notions which can sometimes seem abstract to an adolescent. The goal is to steer your child towards knowing how to manage their bank account when the time comes, and to deal with financial questions as calmly and confidently as possible. For that matter, the Consumer Protection Bureau has created numerous resources in the area of financial education.

Sound Financial Habits for a Healthy Bank Account

We often tell young people that they should act like adults in regard to managing their finances. But this term may not necessarily be the most appropriate if we consider the number of households in Quebec and in Canada that are over-indebted or have difficulty correctly managing their day-to-day budget. How can we teach our children to behave like adults (that’s to say “responsibly”) in relation to money if we, ourselves, are unable to manage the household budget?

Since it’s never too late to improvement ourselves, it’s worth noting that there exist a number of resources which can help us to better manage our finances, no matter what difficulty besets us. Making the choice to ask for assistance is a first step towards being financially sound. After all, financial education is not only meant for the young!

Build Sustainable Financial Wellbeing

The financial situation of a household can change several times over the course of a lifetime, and nobody is really prepared when it does. Whether we come into a significant of money or experience a drastic decrease in revenue, certain adjustments are necessary to manage the new circumstances. To do this, there is always the possibility of getting assistance from professionals like financial planning advisors.

Organizations like Prosper Canada aim to help citizens who encounter difficulties to manage their budgets so that they may reach financial stability. In the case of an unexpected infusion of money, there is a variety of finance professionals who can help and advise you on how to manage your financial affairs and to make your nest egg grow.

Kaleido’s financial education lexicon, created by financial planner Catherine Levesque (from our LA VRAIE VIE e-magazine (french only)), is also at your disposal and can help you to manage your day-to-day money matters. It can demystify some of the financial jargon that is above the head of the layman.

Professional Financial Services to Better Manage Your Budget

Apart from daily financial transactions, it is also important to be prepared, especially in terms of savings, to deal with the various life events that may occur. There exist a great number of savings options, you just have to make sure that you find the one that best corresponds to your situation: the birth of a child, buying a home, retirement, disability, etc.

Kaleido offers a savings product that enables you to provide for your children’s future with peace of mind: RESP (Registered Education Savings Plan). This education savings plan offers various options that make it adaptable to every family’s needs. Make use of our education-savings calculator to better understand what this plan can do for you.

Moreover, if you haven’t already done so, you can implement certain strategies right away to gain control of your finances and avert unpleasant surprises. Here are 4 such strategies that you can quickly put into practice, and that will make a real difference in your dealings with money:

• get your budget in order

Make sure you know exactly how much your income and your weekly or monthly expenses are. Going through the exercise of writing out your budget by hand often allows you to realize exactly how you spend your money, and to identify the types of purchases that are more superfluous and that could be reduced, or even completely eliminated. Kaleido has a digital, budget-management tool that is available to you, free of charge, and that can enable you to plan your budget with ease.

• have a reserve fund ready

Set up a reserve fund; or as it’s known more colloquially, a “rainy day” fund! This consists simply of setting money aside in a savings account in anticipation of whatever might befall you (loss of employment, accident, disaster, or other).

• evaluate your financial profile

Ask yourself the well-known question from the kids’ fable “am I more of a grasshopper or an ant?”. Knowing your financial profile allows you to set limits. If you’re similar to the ant, everything’s great. But, if you’re more of a grasshopper type, and tend to spend money easily, it is possible to put certain strategies in place to limit frivolous spending (don’t opt for a high spending limit on your credit card(s), carry cash as often as possible when you go out in order to avoid impulse purchases, etc.).

• consult a financial planner

Consulting a financial expert can help you put your finances in order and to get the most out of your money. Financial matters are not always easy to understand but a financial advisor or planner has the skill and knowledge to help you understand how to invest your money and how to plan for a worry-free financial future.

By applying these basic measures, you will regain control of your finances and you will be well on your way to better financial stability.

Financial education is a vast domain that everyone among us, regardless of our age, would benefit from considering seriously. The good news is that there are many organizations and resources available to assist us. So, as the old saying goes: “better late than never”! You can get going on it right now! In fact, Kaleido’s clients can benefit from our extensive family coaching and support options, like family financial services, which are provided by our specialized partners.