Use financial gifts to talk about budgeting, saving and the value of a dollar
TORONTO, Nov. 12, 2014 /CNW/ - With the holiday season approaching, many parents and grandparents find themselves thinking about what to give a child as a present. According to a recent TD survey, many of them are choosing to give the children in their lives some form of financial gift, including cash or an RESP contribution. Some see this not only as a monetary gift, but also as a way to start teaching children about responsible money management.
"Parents know it's important to help their children learn healthy financial habits, and they are looking for simple, relevant and fun ways to start," said Linda Mackay, senior vice president, retail savings and investing, TD Canada Trust. "Giving a financial gift for the holidays, like a contribution towards their RESP or cash to kick start their first bank account, is a great way to get the conversation started."
The TD survey also found nearly 90 per cent of parents think it's important to start talking to children about finances before they reach their mid-teens. Almost four in 10 think the conversation should begin before their children are 10 years old.
Nanny Robina, parenting expert, says the key is keeping the conversation at a level appropriate to a child's age.
"Children love to learn new things, especially if parents can turn that learning into something fun to do," said Nanny. "One way to do that with younger children is to play games that also have an instructional element to them, like spelling games and those that teach basic math skills."
MacKay agrees, noting that even very young children can learn the basics about managing money, such as the value of a dollar and how that dollar can add up through regular saving, ultimately allowing them to pay for something they really want down the road. "As children get older, parents can expand the conversation to cover more complex ideas, such as basic budgeting and setting spending priorities, building up to things like investing early and the power of compound interest," she says.
Many parents or grandparents also give a child financial gifts at other times of the year, according to the TD survey, with nearly two-thirds of them contributing to their education savings, often through a Registered Education Savings Plan (RESP). Ubbin says this can be a great opportunity to build on the conversation and reinforce lessons learned over the holidays throughout the year.
"Children love to play pretend, so why not use that as an opportunity to teach them about money?" Nanny said. "For example, giving them fake money and a grocery list of items to "pay" for helps them understand the value of a dollar. This method can also extend into spending and saving with an allowance, which can then be applied to budgeting in high school and university."
MacKay offers some age-specific advice on how a financial gift can be used to help a child learn good financial habits:
Under 6 years old: Keep it really simple. Give a child some shiny coins they can put in a jar or piggy bank to watch their savings grow. Make the experience of adding to the jar a big deal and as the number of coins grows, swap them occasionally for the equivalent amount in crisp bills. This helps the child understand the value of different denominations of coins and notes and develop a sense of pride in their savings habit.
6 to 10 years old: Start introducing more complex ideas, such as how long it will take to buy something a child really wants if they save a certain amount of money every week. The financial gift can be used to help them get closer to that goal. This is also a good age to help children open their first bank account so they can learn to make deposits, withdrawals and watch their funds grow. The importance of money and saving can also be reinforced through things like a small allowance, perhaps earned through set chores.
11 to 15 years old: The gift of a contribution to a child's Registered Education Savings Plan creates an opportunity to talk about how investments like a Registered Education Savings Plan work, the importance of investing early to take advantage of interest and why saving for post-secondary education is also an investment in a child's future. Your children might also be earning a little money through odd jobs or baby-sitting so it is a perfect time to talk about goals, budgeting and saving for something they'd really like including university or college.
MacKay says it's easy to understand why many parents and grandparents are giving children a financial gift as a holiday present.
"The real gift here is financial education, which is the foundation needed to develop healthy financial habits in the future," said MacKay.
About the TD Canada Trust Festive Investment Cheer Poll
TD Canada Trust commissioned Environics Research Group to conduct a custom survey of 3,529 parents within a broader sample of 6,015 Canadians aged 18 years and older. Responses were collected between February 11 and 25, 2014. .
About TD Canada Trust
TD Canada Trust offers personal and business banking to more than 11.5 million customers. We provide a wide range of products and services from chequing and savings accounts, to credit cards, mortgages and business banking, to credit protection and travel medical insurance, as well as advice on managing everyday finances. TD Canada Trust makes banking comfortable with award-winning service and convenience through 24/7 mobile, internet, telephone and ATM banking, as well as in over 1,100 branches, with convenient hours to serve customers better. For more information, please visit: www.tdcanadatrust.com. TD Canada Trust is the Canadian retail bank of TD Bank Group, the sixth largest bank in North America.
SOURCE TD Canada Trust
Sandra DeCarvalho, TD Bank Group, 416-944-7095, sandra.decarvalho@td.com; Rachel Halpern, Hill+Knowlton Strategies, 416-413-4646, rachel.halpern@hkstrategies.caCopyright CNW Group 2014