Some of you might remember holding their mommy’s hand as you were walking into a bank for the first time to open their first account. How should we proceed in today’s economy if we want to help our children manage a bank account? When should we start talking about money?
Without making it the main subject at your family dinners, you can start talking about money with your child around his sixth anniversary.
Group Investors published a document to help parents teach basic financial management to their children. Here is an overview of the suggested steps:
6 to 12 years old
- Give a piggy bank to your child where he will keep his cents;
- When time comes, open a bank account and deposit a fixed amount regularly;
- Some games such as Monopoly and Money and youth can help you teach him a few notions of personal finances.
12 to 16 years old
- Prepare a simple budget with your child;
- Explain the benefits of an RRSP, including tax saving;
- Reserve a portion of his allocation in the form of “bonus” that will be given o charity.
16 to 18 years old
- Upon receipt of his first T4, help him file his first income tax return;
- Co-sign his first credit card and teach him to pay in time in order to maintain good credit and avoid interests.
From piggy bank to bank account
When the time comes to empty your child’s piggy bank, you can “roll” your cents by buying paper or plastic rolls sold in pharmacies and dollar stores or you can use one of the many machines available in grocery stores that count for you and give you a receipt. This method is faster and cleaner because your child does not have to manipulate money but you should know that the machine would keep a percentage of your savings. It will be yours to decide if that percentage is worth the price of the paper rolls and your time.
Banks and credit unions operate under a system of their own. In general, it is possible to open a joint bank account with your child at any age but it will be around the age of 12 that your child will be allowed to use a bankcard with his own PIN. At that time, you will have to talk about the importance of keeping your PIN secret. Some schools also offer student-banking programs that offer several benefits such as the absence of administrative fees and a higher interest rate.
It would also be wise to tell your child early that you cannot buy everything because you have other priorities at home and that even though your card looks magical, it is not filled with infinite funds. Later on, you can talk to your child about various professions, the wages that he can expect and the importance of managing his budget to work in the field that interests him and still make the ends meet.