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The Globe and Mail and We Charity have partnered to promote media literacy and education around global issues. This is part of a series of discussion guides and videos for parents and their children to read, watch and discuss together

For teens, making financial decisions can feel overwhelming, but they already make many money-related decisions and have been for years. Every purchase they make, every dollar they save, is a financial decision that affects their future decisions. Getting a firm handle now on the concepts of goal-setting, earning, saving, spending and donating money will help ensure they make the best financial-management decisions in the years ahead.

Conversation starters

1. Name something that you later regretted spending money on.

2. Name the most expensive thing you have ever purchased and where the money came from (e.g., earnings from a job, birthday savings, parents, etc.).

3. Ask an adult in your life:

  • What does it cost per month to live?
  • Has money ever caused you stress? What do you do to lessen stress?
  • Do you have any purchases that you have regretted? Why?
  • If you could give your younger self money-related advice, what would it be?

Earning, saving, giving, spending

For each of us, personal finance starts with earning money, since without that, there is none to save, give or spend. Saving should be next, and the sooner you make that a habit, the better equipped you will be in the future. Giving comes from sharing with others. As children, we are taught to share. By applying the concept with our time or money, we help promote causes we are interested in, assist people who face challenges that we do not and more. Finally, there is spending. While spending is as important as the other actions, if not more, it should come last. Often, we are tempted to spend first, before we know how much money we have available. Or we spend before we think about saving and giving, then we run out of money before we can set any aside for the future. If we leave spending till last, we will be in the best position for financial success and independence.

With this in mind, list three to five items under each of the following categories:

  • Ways to earn money
  • Items to save for
  • Organizations or campaigns to support
  • Items to spend money on now

What criteria did you apply? Might someone else classify some of your items under different categories than you chose? Why do you think that is?

Watch, then discuss:

The Marshmallow Test examines childrens' ability to resist temptation and defer gratification:

Edit video

Applying what you saw in the Marshmallow Test, consider the difference between studying the night before a test and watching TV instead. What might be some short– and long-term reasons for studying the night before a test? Why might someone choose to watch TV instead of studying?

Watching TV the night before a test is considered instant gratification. You want to enjoy TV now, so you watch it, but the consequence is that you fail the test, which lands you in summer school. Studying, on the other hand, results in a good test score and overall good grades. In the summer, you're free to watch all the TV you want and more. Putting off something enjoyable now so that you have something even more enjoyable in the future is called delaying gratification.

The same principle applies when it comes to saving money. You begin with a goal to put money aside for, but then you must be patient and save money until you have enough to fulfill the goal. Savings can take different forms. It might not be easy at first, but as you see the savings grow you will see the rewards. If you set up a savings account to automatically pay yourself first, you learn to live without that money. Regular automatic transfers to a separate savings bank account removes the self-discipline factor because you won't have to remember to add to your savings. You will be saving pro-actively rather than waiting until the future to see what you have left. You might want to save a couple of paycheques to buy a bike or new phone, or you might be saving for a bigger dream of a car or school tuition. Whatever you are saving for, it is good to set a goal and stick to it.

Do you think you will be able to successfully save for your goal? Why or why not?

Cashless spending?

Of course, this doesn't mean making a purchase without paying. "Cashless" refers to spending modes other than cash, such as debit cards, reloadable store cards and mobile scans. The main difference is that traditional currency – banknote bills and coins – is not being exchanged. This type of cashless spending is different from spending on credit, such as with a credit card, which involves money that's borrowed with the promise to pay it back under specific, agreed-upon terms.

Some questions to consider:

  • Do you spend differently when you pay with cash versus a “cashless” method?
  • Why might we spend more with “one-click” or contactless spending than when we are paying with cash?
  • What are the benefits of cashless spending?
  • What are the risks?
  • Why is it important to pay attention to how you spend money?

The downlow on debt

Every day we make many financial choices that affect how much money we have for saving, giving and spending. It is important to know how we spend so we can plan for the future and meet all of our expenses without going into debt.

Hopefully, you don't have any debt in high school. But as you enter new stages of your life, you may find you need to borrow money (for example, for post-secondary education such as college or university). If or when you do, you need to include debt repayment in your monthly budget. If you are just making the minimum payment on a credit card, stop! Credit card statements show how long it will take to repay your debt if only the minimum payment is made each month. Even a small amount of debt can take years to pay off, and that is without any new debt being added. Compound interest is the reason the balance grows so quickly, so pay off as much as you possibly can each month, ideally the entire balance.

Financial planners use a few guidelines or rules of thumb to help keep track of how you should spend your money. Of course, there is room to wiggle; for example, if you would rather live downtown, where rent is usually more expensive, but your school/work and amenities are closer, you can reallocate from your transportation budget to your housing budget. Or if you are not repaying debt, you may be able to save more for a rainy day.

Using your net income to calculate, here are the suggested percentages as guidelines:

  • Savings 10 per cent (net income x 0.1 = savings budget)
  • Housing 35 per cent (net income x 0.35 = housing budget)
  • Transportation 15 per cent (net income x 0.15 = transportation budget)
  • Life 25 per cent (net income x 0.25 = everything else budget)
  • Debt 15 per cent (net income x 0.15 = debt-repayment budget)

Key terms

Direct deposit – the electronic transfer of money from one bank account to another.

Earning capital – the value of everything owned including money, property and investments after the value of debts are subtracted.

Equity – assets minus liability: net worth. Also, the value of property beyond the amount owed on it.

Gross income – salary or wages before deductions.

Income – money received in a given period as wages, interest, etc.

Income tax – tax paid on personal income such as wages or investments; regulated and collected by governments.

Net income – the amount of money an individual takes home after deductions such as taxes, CPP and EI.

Profit – financial gain, the sum remaining after the deduction of expenses. See also net income.

Revenue – income made from sales or earned on investment or, as with government revenue, from taxes. Revenue is gross before expenses, in contrast to net income.

Saving balance – the amount of money held in a bank or investment account at a given moment.

Bank – a financial institution that takes deposits and lends money.

Bonds – a loan made to a government or business, maturing on a specified date for the face amount price plus interest. A form of investment for those who purchase them.

Canada Education Savings Grant – an incentive program run by the Canadian government designed to encourage people to save for a child's post-secondary education by offering grants to ease the financial burden. See also Registered Education Savings Plan (RESP).

Canada Savings Bond – a bond issued by the Canadian federal government. Canada savings bonds offer secure investment with competitive interest rates. See also bonds.

Compound interest – interest earned on the principal amount plus the interest that has already accumulated. In other words, interest earned on top of interest.

Emergency fund – money set aside for unexpected expenses.

Interest – the cost of borrowed money. The price that lenders charge borrowers for the use of the lender's money. For example, you pay interest when you borrow money and you earn interest when you save money in a savings account. There is simple interest and compound interest.

Interest rate – the interest payable on a debt expressed as a percentage of the debt over a period of time (usually a year). (E.g. the amount a financial institution charges for the money it lends or pays for the money on deposit.)

Investment – the use of capital to create more money, either by producing income (interest, dividends, rent) or by increasing in value (capital gain).

Pension – income an employee receives after they have retired or become disabled.

Portfolio – all the investments an investor owns.

Principal – the amount of money or capital you begin with – for example, the face amount of a bond.

Registered Education Savings Plan (RESP) – a savings plan sponsored by the Canadian government that encourages investing in a child's post-secondary education. Subscribers to an RESP make contributions that build up tax-free earnings. Under the Canada Education Savings Grant, the government contributes up to 20 per cent to a maximum of $500 a year to plans for children younger than 18; depending on income, families may qualify for an additional top up to a maximum of $100 a year.

Registered Retirement Savings Plan (RRSP) – a legal trust registered with the Canada Revenue Agency and used to save for retirement. RRSP contributions are tax deductible and taxes on earnings are deferred until the money is withdrawn. An RRSP can hold stocks, bonds, mutual funds and more.

Retirement savings – money that is put aside and invested to be used specifically to live on in retirement.

Savings – money put aside to be used at a future time. Also a form of deferred spending.

Simple interest – interest calculated on principal alone.

Stocks – an investment representing partial ownership (a "share") in a company.

Tax-Free Savings Account (TFSA) – a savings account where amounts earned are not taxed and withdrawals can be made tax-free. Tax-free savings accounts were introduced in Canada in 2009 with a limit of $5,000 a year (now $5,500 a year). You can carry forward the unused amounts. This savings account is available to individuals ages 18 and older and can be used for any purpose.

Giving charitable donations – a gift or contribution to a non-profit organization, charity or private foundation. Donations are tax deductible if the charitable organization is registered with the Canada Revenue Agency.

Corporate social responsibility – business and corporations that use their resources, including people, products and money, to give back to and better their community locally and globally.

Fund drainer–fundraisers that end up costing more than they raise. The risk of a fund drainer may be reduced by careful planning and budgeting.

Definitions were composed using the following resources: Barber, Katherine, ed. Canadian Oxford Dictionary. 2nd ed. Oxford: Oxford UP, 2004,, Soanes, Catherine, and Sara Hawker, ed. Compact Oxford English Dictionary. 3rd ed, revised. Oxford: Oxford UP, 2008.

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