Westworld Alberta
Issue link: http://westworldmagazine.ama.ab.ca/i/80542
KEEP IT REAL. Is it diffi cult to teach chil- dren about money in a cashless society? It can be challenging, says O'Neill. Many chil- dren have grown up seeing debit and credit cards in action – so they understand cur- rency in its virtual form, but not necessarily its real-world function or value. "I can tell you without hesitation that at one point, each of my children thought that if you needed more money, you just had to go to the ATM," says O'Neill. "When you start getting those signals – when your chil- dren think the ATM is this bottomless pit from which you just get money – boy, it's time for a sit-down talk." But if you've had that talk, the cashless, online world offers a wealth of learning opportunity. "We're a very techie, online family and my children don't handle a lot of actual cash," says Calgary mom Gemma Kelsall. Instead, her daughters, aged seven and fi ve, use threejars.com, an online tool in which parents are the "bank" but children manage their virtual money through saving, spending and sharing (charitable giving) jars. GIVE THEM ALLOWANCE. When is the right time for a child to have an allowance? "The day you want them to understand money," says O'Neill. "It doesn't have to be $25. It can be $1." Or, for a very young child, even less. Cathy Ward, a mother of three kids aged 15, 12 and nine, and an AMA mem- ber of 12-plus years, agrees. She started each of her children with an allowance of $1 a week at age six. By seven, they were getting $2 a week, and at age 10, they got a raise to $5. Her 15-year-old-daughter now gets a respectable $20 a week. Ward's "raises" refl ect her children's changing needs and evolving responsi- bility. The allowance of the eldest takes into account her increasing transit use and more active social life, and frees Ward from constantly doling out small amounts for bus fare or movie tickets. "She has to budget for all of that from her allowance," Ward says. "And if she spends her allowance, well, she either has to wait – or earn more money through babysitting." When Ward hands off the allowance, she relinquishes all control of what her children do with the money. This allows the kids to learn the difference between needs and wants for themselves. "It's 54 WESTWORLD >> SEPTEMBER 2012 theirs," she says. "And frankly, I want them to make mistakes. Lots and lots of mistakes. I want them to have a week when too much goes into whatever – candy, caffe lattes – so they can't go to Teen Night [at the swimming pool] or buy something that they want. I want them to make bad choices now so that they make good choices later." CULTIVATE THE SAVING HABIT. O'Neill suggests introducing the concept of "habitual saving" to children as soon as they start managing "serious" amounts of money. What that entails will vary from family to family – he suggests anything over $10. "That's a good amount for the parent to say, 'Let's take a piece of that and put it into sav- ings.' Directing some of that money into the fi nances are in a mess, it If your own doesn't matter what you say to your kids about money. bank repeatedly over several years makes saving a lifetime habit," he says. Start by taking the kids to the bank and walking them through the process of opening their own savings account. But let them determine the ratio of saving to spending money. Too often parents make the mistake of paying an allowance of, say, $20 and then clawing back $10. That's forcing saving, and it doesn't teach anything. "In order to learn, the child needs to have more control over the action," says O'Neill. Parents can help by suggesting a realistic sav- ing goal, such a new bike or summer camp. GIVE THEM CREDIT. With the latest numbers from Statistics Canada pegging the Canadian household debt ratio at more than $1.50 for every $1 of disposable income, teaching children about debt and credit is top of the agenda for many parents. Start talking about credit cards in the tween or early teen years. Explain what happens when you charge some- thing on a card, and why you should pay the bill on time. Also touch on aspects such as service fees, rewards and security features. "The best way to learn to handle credit is to, in the teenage years, get a very small credit card account with a parent," O'Neill says. The credit limit can be as small as the parent deems appropriate. The parent can be privy to all the transactions and able to cancel the card if necessary. "Yes, it can be a scary device in the hands of a teenager," O'Neill says. But by this time, your child should have a solid foundation – an understanding of what not paying that bill will cost her. "Credit cards can be a great educa- tional tool," he adds. "Only by using something can someone really under- stand how it can help or hinder them." WALK THE TALK. If your own fi nances are in a mess, it doesn't matter what you say to your kids about money and financial responsibility. They'll model their behaviour after yours. So put your own habits under the micro- scope. Are you an impulse shopper? Do you spend more than you earn? Sit down with a fi nancial advisor and make sure that your fi nancial plan is as solid as you'd want your children's to be. iStock