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When children are five years of age or younger, any monetary gifts can go into their piggy bank and they should spend it – with their parents’ permission – on what brings them joy, Kelley Keehn says. / Getty Images

Financial advisors have a great opportunity to make financial literacy a priority for their clients with families – especially for those with children.

Plenty of studies reveal that most adults – let alone kids – fail basic financial literacy questions about investing, saving, credit and debt. But as important as financial literacy skills are to your clients, knowing their children are being raised “money smart” is likely more of a concern to them than even their own well-being.

Although many parents believe these skills should be taught at schools across Canada – and they should be – the education needs to start at home. Advisors can help them start those conversations.

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That’s especially important during challenging times like these. In May, 2020, the Financial Consumer Agency of Canada encouraged parents to talk to their children about money and finances as the financial effects of the COVID-19 pandemic began to take hold.

But while a recent CPA Canada survey found that 88 per cent of Canadians believe parents bear a responsibility to teach their children about finances, many are intimidated to do so. Perhaps they’re struggling with their own finances or their financial literacy skills are lacklustre.

Advisors can play a big role in helping their clients talk about money-related issues with their children by educating them on the topics that need to be discussed. While many parents may be under the impression that they have to reveal intimate details about their finances when educating their kids about money, that couldn’t be further from the truth. Rather, parents need to make it fun and tie all lessons to their children’s goals. Those lessons and goals are dependent on the children’s age and stage of development.

For example, when children are five years of age or younger, discussion about money needs to be positive and fun. Any birthday gifts from family can go into their piggy bank and they should spend it – with their parents’ permission – on what brings them joy.

Parents should obtain real money such as cash and coins and have discussions around it. Canadian money is beautifully rich with colours and history lessons. Although COVID-19 has us fearing actual money – and the move toward a cashless society began long before the pandemic – kids need to be taught that while money may have germs, it’s not dirty or to be feared.

When children are between the ages of six and 10, they should be taught about establishing short-term savings in a bank account as they receive gifts from family, an allowance, or pay for providing extra help around the house. They should learn how to divide money coming in. Devise a plan for how much should go in the fun piggy for their spending pleasure and how much should go into their short-term savings for wants – such as a new video game – they have coming up.

Between the ages of 11 and 15, it’s time to get children thinking about their long-term goals. Just as adults need to allocate savings toward retirement, parents should teach their kids to start planning and saving for a goal a few years into the future. Will their high school take a trip to Europe after the pandemic? Are they working odd jobs and bringing in more than an allowance? How much of their money should be split into fun spending, short-term savings and long-term savings? Use visuals like goal trackers on their bedroom wall to keep their savings habits and goals top of mind.

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Finally, when kids reach the age of 16, it’s time to teach them about credit. Parents should extend to them a line of credit from the “Bank of Mom and Dad.” The exercise needs to be made as real as possible with a credit agreement, parameters for repayment, and financial penalties for default. That way, the child gets to practice before using a real credit card and potentially making mistakes that truly hurt their credit.

To make all of this happen, advisors should share resources with their clients, such as newsletters, live events, or virtual communications, to encourage them to talk about money with their kids.

There are more resources and videos at the website for Talk With Our Kids About Money Day, a national event that takes place today, April 14, and hosted by the non-profit Canadian Foundation for Economic Education. (Bank of Nova Scotia is supporting the event and The Globe and Mail is its media sponsor.)

Practical Money Skills - Canada is another excellent resource to help Canadians understand the fundamentals of money management with games, calculators, and lesson plans.

The COVID-19 pandemic has been incredibly difficult on parents, with many home-schooling their kids while struggling to navigate their own finances. As their advisor, you can nudge them with resources that can spark conversations with their kids while increasing their own financial literacy skills in the process.

Kelley Keehn is a personal finance educator and best-selling author. She is also a former advisor.

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