There is a lot to learn about money before one can be responsible enough to start earning it. So many parents think they are showing their kids that they are loved or helping their kids by buying them the things they want (or claim to need). What they are actually doing is teaching them is to indulge in short term instant gratification instead of long term fulfillment. On the other hand, there are parents who don’t have the means to do this for their children and simply tell them that they can’t afford it without any further explanation.
The tween (10-13) years are a great opportunity for you to spend some quality time with your child teaching them the value of their money and how to manage it. Here are a few things that should appear on your Parent-Child to do list:
- Setting up savings account at the bank: When you go with your child, be sure to ask to see the bank manager and ask them to give your child a small tour of the bank. A good bank manager should be happy to accommodate you, although you may need to make an appointment. Be sure to have your child involved at every step of the way. This could also be an excellent opportunity to teach your child how to make an appointment.
- Taxes: It’s a sad fact but everyone has to deal with it and it’s never too early to tax your child’s income. The only difference is, at this age, you the parent will be the one collecting the taxes. Tip: Put the money aside as a kind of savings for your child to finance them in the future when they will really need it. They will be happy you collected the tax and see the long term benefits of paying tax. After all, taxes do end up coming back to us in the way of government services. This is a great opportunity to also take some time to discuss what services the government provides at the different levels and how to use them.
- Good Financial Management: Gee, wouldn’t it be great if you could teach your child to never have to worry about where their next meal is coming from for the rest of their life? When you earn money, what do you do with it? If you just turn around and spend it all, what will you do when it stops? How do you set-up a budget? How do you plan? How do you save? How do you track where your money is going? Assuming your are already managing your own finances, get your child involved in your finances. Sit down with them and show them where all the money is going, from the moment you receive your pay, to the moment there is nothing left. Don’t forget to include things like taxes, benefits, investments, mortgage, car payments, credit cards, savings, vacation planning, extra curricular activities, clothing, food, and school supplies. Don’t forget to also include long term investments such as college/university and retirement. Don’t be afraid to talk to your child about the true cost of living at different comfort levels such as poverty, bearable, comfortable, very comfortable and worry free. Which of these lifestyles do they want to live? Discuss with your child their current interest in such matters and ask them to project if they believe their current academic path will lead them to a rich and fulfilling life. Taking the time to talk with them about these important matters may even influence their academic decisions over the next few years.
- Investing: Investing in our future can come in many ways. The decisions that we make today ultimately determine how we will live tomorrow. We invest in our relationships, our mental health, our physical being (body), our careers (even as a child, our career is to be a student), our spirituality (right from wrong, right from right, appreciation for everything and everyone around us, self-image, relationship with our maker, etc). Financial investment is an important aspect. The most basic rule is the 10% rule. When ever you receive any money, always take 10% right away and invest it. Don’t even give it a second thought. It’s gone. At the tween ages, when their expenses are relatively low, consider increasing this to 30-50%. It may be hard at first, but when they see their savings increase, they will start to develop a sense of pride in their savings. At a childs age, consider teaching them how to invest their money in Canada Savings Bond so that they can see their money grow. A more advanced strategy is to split your savings. Think of it as having three pots. The first is low risk/return investments like a bank account or a bond. The second pot is for higher risk/return investments such as mutual funds. How you divide your investments between the two is up to you. Most people do a low/high risk 70/30 split although younger people may be comfortable with something as high as 40/60. When you are young, you still have time to take chances. What’s the third bucket for? That’s where you put money aside for planed investments. Remember, any profits/interest should be divided up the same way you would normally allocate your money as described above. If you apply this sound strategy, you will ensure that your investments will grow as quickly as possible while ensuring that you never loose it all. Yet another very simple strategy is to get into the habit of never spending more than half of everything you have. Sure you may have to wait a little longer to purchase those things you want, but you will end up making better decisions in the end. It won’t be long before your child starts thinking twice about impulse purchases remembering how long it took them to save up for it. Discuss the power of compound interest. If your child give you a hard time at spending time with you to learn this essential information, ask them to quickly answer the following question. “Which would you rather receive: One cent doubled every day for 30 days or $1,000 a hour, 24 hours a day for 30 days?” Sounds like an obvious choice, right? See the following web page: http://www.squidoo.com/compoundinterest
- Wages vs. Profits: No matter who you are, there is always going to be one problem. There is only so much of you to go around. No matter how hard you try, there is a limit to the wages you can earn. However, profits are virtually unlimited. You can always hire more people to work for you. All you need to have is great people management skills. That’s why places like dollar stores exist. Consider that they are making less than a dollar profit on each item they sell. How can you make a living that way? By ensuring that you sell a lot of those items. Don’t take my word for it. Think about the rich people in this world. They all have people working for them which is how they can earn millions a year. I doubt it very much they could earn that much collecting wages working for someone.
- Know yourself: If you want others to pay you, you need to have to know what you have to offer them. It’s never too early to create a C.V. Be sure to include any jobs you did, paid AND pro bono (i.e. for free), and indicate all of your skills. Are you hard working? Do you have people skills? Are you a responsible individual? Do you know how to make change? It amazes me how few youth today can actually make change without using a computerized cash register. Don’t take my word for it. Go to a store and go through a young cashier. At the last second after you have given them your money and they have punched the amount into their cash, give them an additional 6 cents and look for the confusion on their face. As your education and work experience grows, so will your C.V. and it will be easier to show people who you are and what you can do.
- Reinvest in yourself: If you are going to run a small business, be sure to always put aside some of the profit to pay for supplies, facilities etc. that you might need to run your business. Also put some aside to be used in financing your next business venture.
These are all essential skills that will come in handy for the rest of your life.
Please take a look at the following article. It not only covers jobs, but teaching your kids about managing their finances, setting up a savings account, taxes:
No matter what your business is, developing and maintaining a good relationship with your clients is a worthwhile investment. It is easier to keep a good return customer than to find a new one. Being recommended by a client can be one of the most valuable things they can give you. That is why some people start out working for free. If you choose to go this route, just always be clear on how long you are willing to work for them at this rate or what you are willing to do for them for free. This will help you avoid any bad feelings and allow you to eventually start charging them for your services.
If you decide to start your own business, first make sure it’s ok with your parents, and then be sure to tell everyone about it. Nobody is going to come knocking on your door or calling you if they don’t know you even exist or are looking for work.
When you do a really good job and the client is happy with your work, ask them if they would be willing to put it down in writing for you. These letters of reference are important, not only when you are trying to get work, but when applying to university.
Finally, plan your teen year career carefully not to end up disappointed. Depending on the kind of job would you like to be able to do as a teen, you might want to start getting ready sooner than later. Jobs like Camp Councillor, Life Guard, Tutoring, require you to have certain skills. Plan ahead and be prepared.