Yes, these are my babies. As a parent, there isn’t a day that goes by that I don’t think about their financial future; are we doing enough to help them understand what role money plays in their lives? Are we saving enough to help them get ahead and have we made the most of the available programs to help us do that? What kind of relationship are we helping them create with their money?

Here are the top five actionable ways that you can help your children (or grandchildren) get ahead financially:

 

1. Start Financial Education Early & Encourage Saving from a Young Age

You cannot start early enough. Perhaps the most important aspect of financial education for your children is hearing you talk about money. Money should not be a taboo subject in the household. Be open about financial topics, including household expenses, savings, and even challenges. This transparency helps kids understand the realities of financial management and the importance of responsible spending and saving. Starting today, involve them in your own real-life situations, like grocery shopping or family budget planning. This early exposure is crucial in shaping their attitudes towards money and finance.

Encourage saving from a young age. A piggy bank might be your child’s first savings account, but don’t stop there. Open a savings account for your child and encourage them to save a portion of their allowance or gift money. The key here is to teach your kids about the power of compound interest and how investing can grow their savings over time. Use an online calculator to demonstrate how money grows over time. A visual representation can be a powerful motivator for them to save more.

2. Open a Charitable Gift Fund and Let them Choose

With the holidays fast approaching, we’re reminded that charitable giving can be a powerful way to teach empathy and the importance of giving back. Relative to private foundations, Charitable Gift Funds are more accessible, more cost efficient, and offer greater flexibility. Involve your children in the process of selecting charities and making the investment decisions within the fund. This not only fosters a sense of responsibility towards society and helps them understand the value and impact of money it also introduces basic investment concepts.

3. Lay the Groundwork with RESPs

Registered Education Savings Plans (RESPs) are a fantastic starting point—you should start as soon as your child has a SIN. The beauty of RESPs lies in government grants that match a percentage of your contributions, meaning free money towards your child's education! Plus, it’s a tax-sheltered way to grow your contributions. The earlier you start, the better. Make sure to align your contributions to maximize the government grants. Explain to your kids how the RESP works and show them the growth over time. This is a practical lesson in the power of saving and investing for the future.

4. Teach the Value of Saving and Investing with TFSAs

Once your child turns 18, they can open a Tax-Free Savings Account (TFSA). This account is a versatile financial tool that allows them to save and invest without paying taxes on the growth or withdrawals (a gift to Canadians!). Engage them in setting up their own TFSA and making their first investments– it should be a memorable milestone! Encourage your child to contribute early and regularly, even if the amounts are small. Over time, they can use this account for various financial goals, be it education, travel, or starting a business.

5. Prepare them for Homeownership with the First Home Savings Account

With the housing market being what it is, helping your child to save for their first home is a priority for most parents today. The First Home Savings Account (FHSA) can help make that goal more attainable. By saving in this account, your child can take advantage of tax deductions and tax-free withdrawals for the purchase of their first home, giving them a significant leg-up in the property market. Start the conversation about homeownership early. Discuss the importance of saving for major life milestones and the benefits of tax-advantaged savings plans.

The Time to Start is Now

Our goal as parents should be to help the next generation do better than we’ve done. It’s never too early or too late to start these conversations and actions. By focusing on financial education, encouraging saving habits, and making the most of government-assisted plans like RESPs, TFSAs, and the First Home Savings Account, we can help our children build healthy relationships with money and financially independent futures.

 

The future is bright!

 

Kayte