Jennifer Black, believes educating young people in financial literacy and responsibility should start young. A Senior Financial Advisor at Dedicated Financial Solutions and Manulife Securities Incorporated in Mississauga, Ont., and a mother of two, Jennifer has first-hand experience in the importance of ensuring a strong financial foundation for your children.
"I do think that it's the parents' responsibility to set the groundwork for how to use money," she says.
Many parents are trying – but their children say they are not doing a very good job. Almost 90 per cent of young people surveyed by the Canadian Institute of Chartered Accountants (CICA) said that their parents have tried to teach them about money management. Yet just 38 per cent felt their parents have been very successful at it, according to the 2011 survey conducted by Harris/Decima.
And post-secondary students express little confidence in handling their finances. Just one-third are very confident in their ability to stick to a budget, and fewer than half (48 per cent) are very confident about using credit cards responsibly, the CICA survey found. Only 43 per cent have a budget, just 52 per cent track their spending, and 27 per cent do not limit their spending.
According to Ms. Black, building a foundation in handling money has to start long before students move on to college, university or the workforce. High school is the ideal time to help children create a budget discipline. At a minimum, teens should be expected to put some of the money they receive from any work or gifts towards their discretionary spending.
But setting aside money to go to the movies or out for pizza with friends is only part of the equation. "It's too easy to budget down to zero dollars, and spend everything you're making," says Ms. Black. "That's just as bad a habit for students as it is for adults. It's vital for students to put a percentage of every dollar they receive towards savings, too."
"Even more should go towards savings if students plan on going out of town for post-secondary studies," continues Ms. Black, "as it's fair to expect them to contribute to the added financial burden."
Budgeting lessons can happen at any age. On a family trip to Disney, her two daughters, five and seven, received spending money from their grandparents. Ms. Black made sure the girls knew that if they spent it all on the first day, there would be nothing left.
"They had to learn to budget," she states. "They spent the whole week looking, and only on the second-to-last day started to buy the Mickey Mouse ears and toys. That type of education with money has to start early."
While attending post-secondary institutions, how much responsibility should students have to contribute to their expenses? Even when parents can cover many of the costs, it's a good idea for students to pay for a portion of their tuition. "When you put some skin in the game, it gets you to take some ownership of your education."
Students might not always be responsible for their room and board. But covering the types of expenses they'll have when they're on their own – like phone bills, Internet, gas for the car – helps them to appreciate fundamental budgeting.
Should students work during the school year? Fifty-six percent of undergraduates do, according to the latest Canadian University Survey Consortium study. They average 18 hours a week, though nearly one-fifth (18 per cent) work more than 30 hours a week. The study found that one-third of students who juggle work and school say their work hours have a negative impact on their academic performance.
Ideally, the ability to work will depend on a student's schedule and course workload, with academics a priority, but Ms. Black acknowledges that many students have no choice.
Part-time work, budgeting debt, tracking spending – it's all part of sound money management for students, and it all comes back to the parents' lessons about finances.
In the CICA survey, 91 per cent of respondents agreed that parents should make it a priority to teach them about money, 94 per cent said that being good with money is an important life skill, and 93 per cent said that their parents should be good financial role models.
To create more financially literate young people, parents need to be better educators, be open about finances in the household, and make responsible financial decisions themselves.
"Money is one of those things that's not discussed as much as it should be in families," shares Ms. Black. "But it's important to have those conversations, and set children up to be more successful and responsible when it comes to money."