How to set up kids, teenagers and young adults for success with money
Preparation and practice are the keys to mastering any skill—including money management. Here we break down, based on age, what to teach the kids in your life (it does take a village, after all).
- Age 0 to 6: At this age, your kids have probably started to take note of your spending habits, so take them through your weekly shopping routines; even if you’ve switched to getting your groceries online, talking through your decisions about what to buy and what constitutes a good price sets a positive example. Giving kids an allowance and letting them make money mistakes (and good decisions!) will help them to grasp the fundamentals. Activities like playing “store” can help children learn the money basics, too. Read on for more information on helping small children learn about money.
- Age 7 to 12: This is such a great age for kids. They have some independence, but they’re still appreciative of your support (and not just because you own the Bank of Mom & Dad). So an allowance is a good idea, but so is talking about your own spending habits—even if it’s at a drive-thru, explaining what you’re willing to pay for fast food, for example. Kids should be able to learn and understand budgeting and the reasons behind spending money. In turn, they will learn about saving, too. It’s also a good time to help them open a bank account and start setting small goals. Read more on spending and saving for adolescent kids.
- Age 13 to 17: As teenagers start earning an income from part-time jobs, they learn about their wage versus their “take-home” pay. It’s also a good time to teach them about the value of saving up for a short-term goal, like a school trip or a car, or a long-term goal like contributing to their post-secondary education fund. Important decisions, like whether they should have a credit card or clothing allowance, can pop up around this time, too. Here’s more on how to educate teens about money.
- Age 18 and older: At this point, your kids are preparing to enter the real world. Hopefully, they have a good grasp on the value of money and the know-how to responsibly manage a savings account. Now’s the time to talk to them about using credit, budgeting, education costs, student debt and more.
How to get kids into the habit of saving
Knowing the value of a dollar helps set kids up for a better relationship with money. Getting them started with their own bank account helps foster that knowledge. Look for a kids’ bank account with low or no fees, since the last thing you want is for fees to eat up their smaller contributions. If you can find an account that pays interest, even better. Plus, opening an account will help them learn about banking and form good habits long before they head off to university.
Strategies for teaching kids about money
A piggy bank used to be the go-to way to teach children the value of saving and the costs of spending. But since fiat currency is becoming an increasingly digital endeavour, teaching methods should adjust to that. We outline six simple strategies for teaching kids about money, including spending, saving, budgeting and earning. The article also offers ideas for families who don’t want to use allowances to encourage kids to do household chores—every member should help out!
Everything to know about RESPs and how to use them
An RESP is an investment account geared towards saving for a child’s education. It allows investments inside the account to grow and earn money tax-sheltered, meaning that capital gains, interest and dividend payments won’t be taxed until the funds are withdrawn (and when they are, they’ll be taxed in the hands of the child). A major benefit of this account: The government encourages you to save by kicking in a grant of up to $7,200 over the life of the plan—and potentially more if your family has a low income.
Parents know that no two kids are the same. One kid may be headed off to culinary school while another pursues academia and another goes to an arts college. Different educational paths come with different costs and challenges. Read the advice from a financial planner on how to pay for different types of schooling.
How to save money for an education, parents-edition
Withdrawing from RESPs
When it’s time to cover the costs of post-secondary tuition, housing and books, you’ll want to know the steps involved in withdrawing from your family RESP. Regardless of who made the contributions—a parent, grandparent, other family member or family friend—the withdrawals are usually taxed based on the student’s income (marginal tax rate). Typically, a student’s income is so low they will pay little to no tax. That’s the top-level strategy, but there are other planner-approved tips to help you maximize your RESP savings and returns. (More on that below.)
Financial aid for college and university in Canada
There are many paths to funding your education, aside from your own savings and your parents’ contributions. Look for bursaries, scholarships, grants and provincial loans that may be available to you. Check with your financial aid office.
If you need to fund your post-secondary education but don’t have enough savings, you can use student loans to fully or partially cover costs, depending on your approved amount. Provincial government loans, such as the Ontario Student Assistance Program (OSAP), work in conjunction with federal loan and grant programs to help you pursue the education you want, with a relatively low interest rate. And, as of April 1, 2023, the federal government has eliminated interest for Canada Student Loans and Canada Apprentice Loans under the Canada Student Financial Assistance Program.
Here is how to apply for loans and grants for Canadian students.
How to save money during school
Even if you have scholarships, other funding or a steady paycheque from part-time work, you may still have a tight budget throughout the academic year. Several strategies can help you save money and take advantage of your student status, including making the most of student discounts and finding cheaper travel and textbook options. Read about money-saving strategies.