How to have ‘the talk’ with your teens — the money talk, that is – Calgary Herald

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The conversation about money starts at home

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With inflation rising and the cost of everyday goods going up with it, your teens need to be aware of the current economic climate and be equipped for the future.

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When my parents came here from East Africa, we didnt have much money. So it was really important that we were really careful in terms of where we shopped, and how much we spent, says Alim Dhanji, a certified financial planner based in Burnaby, B.C. So it was a lot more ingrained into you [things like] dont leave the lights on, close the windows.

And I try to teach my own kids, you cant just leave the lights on because that increases our electricity usage [on] our bill or, you know, just those little tips to add to how theyre thinking.

Parents are increasingly having financial discussions with their teens who are becoming income-earners and learning how to manage their own money themselves.

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About two-thirds of parents and teens report that money is one of their most talked-about topics in the past six months second only to the pandemic according to new data from U.S. fintech company Greenlight.

Ninety-seven percent of parents also said they believe financial knowledge and skills are necessary for their kids to achieve life goals, and 93 per cent of teens agreed.

Money has traditionally been a taboo topic, and thats why it can feel uncomfortable discussing it, even among family at home, Jennifer Seitz, education content lead at Greenlight, told MoneyWise in an email.

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Its important for teens to know the personal finance basics so they can be prepared for financial independence in the future. That includes topics like planning, smart spending, saving and investing, and even credit.

The Greenlight study reported that gas prices and inflation were the biggest financial stressors for parents and teens followed by interest rates, taxes, stock market volatility and student loans.

Canadas inflation rate spiked to a 31-year-high of 6.7 per cent in March. Dhanji says parents should discuss the rising costs of everyday products and services with their teens and use real-life examples, like the cost of gas over the years.

He suggests theres an opportunity to cut back on the little things, like making your lunch at home instead of buying takeout, or taking public transit instead of purchasing a car.

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Seitz adds that many teens may also be working at a part-time or after-school job, which means they need to learn how to manage their income as well.

Dhanji teaches Dollars and Sense at elementary and high schools, and speaks at colleges and universities about financial planning. He says peer pressure and social media can play a major role in teenage spending.

When youre a teen, you just want to fit in [Try] to help them understand that they dont need the latest gadget, or name brand clothing and down the road, theyre going to be in a better financial position to do more with their money.

As teens get older, they begin thinking more about their life after graduation and are making decisions about college, careers and financial independence, says Seitz.

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Dhanji advises that teens set up a Tax-Free Savings Account (TFSA) as soon as they turn 18 and save up funds for future goals or expenses like their education.

With my son, Ive tried to ingrain that things are getting more expensive, to write your goals down, he says. And eventually, if you have enough savings, youll be able to buy a condo and start home ownership. But, savings have to start right away.

He suggests teens write down their income and expenses and use budgeting tools so that theyre conscious of how much theyre spending.

A 2021 Greenlight survey also found that 86 per cent of teens are interested in investing, but nearly half havent invested because they dont feel confident, or their parents dont know how to get them started.

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Like any potential investor, teens should know the level of risk they are comfortable with for their money, because it is possible to lose it, says Seitz. Its safer to spread money over a variety of types of investments.

Dhanji recommends teens get their financial advice from a reliable source, like FP Canada, as opposed to social media platforms like Reddit and TikTok.

I recommend starting early, doing some basic budgeting and teaching them a little bit about cost and that they have to be aware of what things cost because without having proper savings, its going to be really difficult to meet their goals.

Dhanji says you can also explain compound growth which he dubs compound coolness and investing, as well as saving money, paying your bills on time and avoiding credit card debt.

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He recommends showing teens trends in the stock market, using their favourite brands as examples.

Seitz adds that its important to be open and ready for financial questions from your teens.

Dont keep money hush hush or shy away from money questions, she says. You dont have to have all the answers to be a trusted source of advice. If you dont know, you can do a little research and learn together.

Dhanji also says parents shouldnt dont be afraid to reach out to a reliable source for help, like a certified financial planner.

At the end of the day, we want to make sure our children are responsible, good inheritors.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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How to have 'the talk' with your teens -- the money talk, that is - Calgary Herald