Episode 27: Talking to Your Kids About Money with Winnie Lau
Welcome back to another episode of Chat with Brandy, a weekly show where we talk personal & business finance, taxes, and how to make money while doing what you love! I’m your host, bookkeeper and tax preparer Brandy Miron, and this is episode 27!
I had a wonderful guest on today to talk about this topic, Winnie Lau from Empowered Life Financial Inc. Winnie specializes in working with families and businesses on financial strategies to get more control and a better cash flow into their lives. One of the things that Winnie and I connected on is that she has a passion for teaching parents how to talk to their kids about money and the different strategies around that. That is something I'm very passionate about as a mom of two young kids myself, and I've always been a proponent of financial literacy, especially for youth. Seeing as how most youth and especially teenagers aren't really given a lot of financial or budgeting teaching in school, I thought this would be a great topic to talk about especially as I had access to such a knowledgeable person in this field.
So why should you talk to your kids about money? First, as parents, we're in the best position to talk about finances with our children. We have all these opportunities for coaching our kids, from when they wake up in the morning until they get tucked into bed, when they're helping with chores, going for groceries, running errands, there are all these instances where money comes up. While there's a limited amount of financial literacy being taught in schools, because money is so tied into our values and carries such an emotional weight, it would be difficult for schools to bring into their curriculum, as money and it's meaning to us can be intensely personal, a reflection of our values or beliefs. Some parents want to wait to talk to their kids about money, not wanting them to grow up to fast or feel burdened by the specter of money.
But others will look at teaching about money in the way you would swimming lessons for our children. We want them to learn this skill so they can be safe, survive, and enjoy all the activities that we do in the water. It's good to look at financial education in much the same way. We should start teaching out kids at a very young age, and by progression as they age, so that when they get out into the world, they aren't drowning in financial debt. Even if there was a "perfect curriculum for finances in schools, there would still be real life applications that will need to be taught at home, little things like unit cost at grocery stores. While they may be too young to be buying their own groceries, it's better to teach them this knowledge when they're younger, as opposed to being thrown in at the deep end when they leave home without having these developed skills.
Teaching children about cash flow can be a very valuable undertaking. Taking young children to the dollar store and giving them 5 dollars to spend is a great exercise in financial literacy. They will know that they can only spend within their means, they'll learn that they will have to account for taxes, making sure they get the right change, teaching them how to count money. Showing these type of skills early can help change the conversation about money as they grow older. Do you want your kids to see you as the source of money, or do you want them to know that they are accountable for their money, that they are going to be the ones responsible for it. Trying to change the conversation when they're teenagers once it's been established that you are the source of money will be much harder task, so teach them those money skills early!
So while there's going to be variances based on values, culture, etc. is there a good guideline about when to start the money discussion with kids, and what kinds of topics are appropriate? What age and topics we as parents will want to discuss will be varied, as everyone has a different value system they apply to money. Some examples could be for a teenage girl, say the purchasing of a basic bra versus a fancy one, while for a 5 year old it may be teaching them to see the price of candy, knowing what they have available to spend. Start off simple with things and progress to more complex money skills. It's about understanding how much money we actually have and how to budget that appropriately, and it's important to not gloss over the credit issue as well.
Teaching kids about credit can start with things like allowances. Getting early advances from the bank of Mom/Dad are some early steps to start introducing the ideas of revolving credit, the idea of credit cards and how debt works. Again, this type of information can be given to them at a very early stage as well. If they're able to understand full sentences then the act of informing them about finances of any type can begin.
Winnie doesn't use the concept of allowance in her program when she coaches parents on how to talk to kids about money, she calls it kids pay. We as parents are always going to spend money on our children no matter what. What Winnie teaches parents is that a certain percentage of that money will go back to the kids. While you were managing all the cash flow, now a certain amount will go back to your children to manage with you. That percentage isn't a fixed money amount, like you will give a child X amount each month, essentially allowance. We as adults don't get paid to do things like clean our rooms or brush our teeth, so it's not always a good idea to reward our kids for something that really is a basic responsibility of having a home and being grateful for what we have, we take care of our things and that's something we should do without being paid. To add some context to that, we're looking at moving away from being seen as the source of money, and reminding your child constantly that you're not that source. So if they are asking you for something, you can let them know they can have whatever they want, they just have to plan for it. You're now putting the money onus back on them, and you're creating more opportunities for conversation and collaboration with your child. This can be very fun and fulfilling, as the child will now understand and accept that they're part of the process.
What about establishing a bank account for your child? While it's not a bad idea to get your child a bank account it really should only be something you look at once you've established with them the change in thinking about money, something that takes at least a few years. Everything you start teaching your child about money in the first few years should be physical. When you're establishing a new thought process/pattern everything should be as tactile as possible. Like a lot of adults, children learn the most from actually doing, so once you've taught them about money using actual cash and they're understanding how to manage and control their money, then you should look into a bank account. It will be an easier transition to bridge if the child understands how they handled and managed their cash when they move on to a bank account.
Winnie also had some tips and advice for parents about teaching money management. First and foremost, don't abdicate your responsibility for their financial education to schools. Take the lead for your family and own the idea of teaching and guiding your children's financial literacy. While your finances may not be perfect you are still their best guide and you can teach from a place of mistake, which is where we can grow the most. As you're teaching finances to your children you will also find that it will translate into your own increased knowledge about money and may help you guide yourself and your family on to the right track. We are our kids biggest advocates and we care the most about our children so in teaching them money management we should be on the front line. Almost every day we hear stories about how money can tear a family apart but by sharing stories about money more openly it can help to bring families together instead.
Winnie's Cash Smart For Life program is really a lifelong program, starting off with the basics of Winnie coaching parents how to coach their kids about cash flow management. In that is addressing the mindset and thinking around money, and Winnie has a whole system to guide you through this learning experience. She literally guides you through and provides you the system so you don't have to do that. In the big picture it really helps train our kids and helps them handle things like making small purchases. Everything that we spend our money on isn't necessarily a logical thing and emotion ties into it very strongly. So teaching them about small purchases early will greatly assist them as they get older and have to make large purchases which can be much more complicated. Many Canadians find themselves spending more than they have and they've never really learned to handle the emotions surrounding large purchases. Part of Winnie's program includes a specific strategy which is the kids wealth program to help identify how we can keep more money in the family and how you as a parent can teach them from small purchases to large purchases. It also assists the parents by giving them the tools they need to keep more money in the family and how to handle the cash flow and create an ongoing healthy financial picture. The programs are great for educational value and clients are given concrete tools you can use to help create more wealth for the whole family. Winnie initially started teaching money management to kids and while they were able to grasp the concepts, if it wasn't being supported at home by the parents then there was really no benefit to doing this. The program does work though when it's taught to the parents who will then be able to pass that knowledge on to their children.
You can find much more about Winnie and her programs offered at www.cashsmartforlife.com and if this is something that you'd like to learn more about or if you're struggling with these aspects, Winnie has a wealth of knowledge and skills to help guide you. Anything you can do to increase your knowledge as a parent or to gain knowledge about finances will have a direct benefit to your children, Some additional resources Winnie suggests are Robert Kiyosaki's Cashflow for Kids and Cash Flow for Adults. These are great conversation starters but it can be a bit advanced to start with, so establishing some of the basics with Winnie is recommended. For further literature on this topic I recommend anything really for Gail Vaz-Oxlade as she teaches about money management as well, and like Winnie her goal is educating Canadians to make better choices and increase their financial knowledge to their and their families benefit.
If there's something you feel you would benefit from knowing more about, you can contact Winnie through her website for more information. Thank you, and we'll see you all next Tuesday for a new Chat with Brandy!