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One of the questions I get asked on a steady basis is whether I know of any resources parents can use to teach their kinds about money. My new go-to resource on this topic is Robin Taub’s book, The Wisest Investment: Teaching Your Kids to be Responsible, Independent and Money-Smart for Life. For today’s guest Q&A, Ms. Taub and I talk about introducing kids to our increasingly cashless society (and when to get a debit card), about saving for postsecondary education and about housing affordability.

Q: Is it responsible parenting to teach kids to live in a cashless world? At what age should kids have a debit card?

A: As your kids get older, you want to introduce “paying with plastic” (debit and credit cards), and move on to digital money and paying with an app on your phone. Most youth accounts (for young people under the age of 19) come with a debit card. Every parent has to decide if their child is ready for the responsibility. But in general, most pre-teens would be ready by around age 12 (middle school age). I’ve heard from parents who said their kids had to start using a debit card because of the pandemic. Up until then, they were mostly using cash.

Q: What do you advise parents on involving their teens in saving for college or university?

A: I actually wrote an article about this in 2018. Some students are not in a position to ask their parents for help, and they have to figure out how to pay for college or university on their own.

If parents (and grandparents) had contributed to a registered education savings plan, those funds will be available help pay for their postsecondary studies. But even when parents are in a position to help financially, it’s still critical for their teens to contribute towards the cost of their education so that they have “skin in the game.” They can apply for scholarships and bursaries. They can work full-time in the summer or part-time during the school year to help save and pay for school.

Q: What’s a smart way for parents to frame home ownership for their kids? I ask in the context of affordability heading south in a hurry. Today’s kids will have a different ownership experience than their parents.

A: Young people are experiencing a housing affordability crisis. It started in the big cities and seems to be spreading to the suburbs and even smaller towns. Parents may want to talk about the benefits of renting while building wealth in other ways besides home ownership and I know you often write about this. It all starts with a budget: how much is coming in and how much is going out, including for housing. If you’re renting, set up an automatic transfer to savings (e.g. to a TFSA) so you can start building an investment portfolio.

Q: What do you suggest for parents who want to teach their kids about investing at a young age? As I understand it, investment firms won’t open accounts for kids under age 18 or 19.

A: That’s right, you have to be the age of majority. If your child is a minor, the investment account has to be held in trust. You’re in control of the account, but you can still use it as a teachable moment to talk about investing basics with your children i.e. what investments you’re buying and why. Try to make sure any information you share is age appropriate. Some high schools offer courses in investing or have investment clubs. And I just read about a fantasy investing competition from Wealthbase where you get $100,000 in virtual cash. You then pick stocks, ETFs or crypto-currencies (depending on the game) to create a virtual portfolio and track your performance on the leaderboard. Your kids can learn about investing in marketable securities without putting any money on the line.

Q: I have spoken to many young adults who clearly see the financial mistakes of their parents. How do you confront your own missteps when teaching kids about money?

A: I encourage parents to be good financial role models for their children so they can lead by example. But that doesn’t mean we have to be perfect – we’re human! We make mistakes. You can be open about mistakes you’ve made, how you’ve dealt with them and what you’ve learned from the experience. There’s a quiz on my website that parents can take to discover what kind of financial role model they are to their kids: 18 statements about your financial behaviours and attitudes that you answer as either true or false.

Q: Now, let’s have your own kids tell us what they earned about money from you

Justin Taub, age 26: The most valuable thing I learned about managing money from my mom has been the importance of living within your means. I’ve heard that trying to hold on to money is like trying to scoop up water in your hands and keep it from running through your fingers and dripping out. This has been my experience for my short adult life. I try not to be the kind of consumer that the comic George Carlin mocked, as “people spendin’ money they don’t have, on things they don’t need, to impress people they don’t even like!”

Natalie Taub, age 24: When it comes to spending, I learned to wait for things I need or want to go on sale. I very rarely pay full price. My mom also introduced me to shopping at sample sales, where the clothes are at least 50 per cent off the retail price! When I went away to university at Western, I lived with two roommates and learned a lot about living on a budget. So when I graduated and started my career, I was ready to move out after about a year and a half. Based on what I’d already learned about budgeting, I knew I’d be able to manage my finances.

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