“The best way to teach your kids about taxes is by eating 30 percent of their ice cream.”

– Bill Murray, Comedian

While repeated in jest, this witty remark highlights an important truth: teaching children about financial responsibilities early on can have lasting impacts. Many of us spend our lives working hard to build wealth, but how do we preserve this wealth if we wish to create a lasting legacy? Even if we do the best job in managing our own wealth, it may amount to little if we fail to prepare future generations for success.

Starting early and teaching future generations good financial habits can yield significant outcomes down the road. The ultimate goal, of course, is to ensure kids achieve financial independence as adults. However, consider that instilling good financial skills at a young age can also help to preserve wealth upon generational transfer.

Today, the challenges may be even greater for younger folks. In our modern era of connectivity, they face new pressures: increasing demands for instant gratification, “fear of missing out” (FOMO), social media’s influence to keep up with the Joneses and financial misinformation spread by influencers, to name a few.

Yes, the basic lessons haven’t changed: Imparting good saving and prudent spending behaviours, helping to set and achieve goals and teaching the virtues of investing and growing wealth. Learning how to carefully save and spend can help to avoid bad credit habits later – it isn’t unheard of to see young people undergo credit counselling due to credit card delinquencies. Recognizing how saving and investing can grow funds over time may be eye-opening. There is also a distinct benefit to starting early: investing $265 per month at age 25 would yield over $1 million by age 75 at a rate of return of 6 percent, but starting later at age 45 would require almost $1,000 per month. Small lessons in financial literacy can help to set good habits for the future.

Here are some age-appropriate teachings for every stage of life:

• The Childhood Years (Ages 6 to 10) – Start early! Begin lessons about saving through the use of a piggy bank. Introduce an allowance when small work is done around the house to teach the rewards of hard work. Even trips to the grocery store can help teach youngsters about the basic costs of essentials, prioritizing needs versus wants, general budgeting and the value of money.

• The Pre-Teen & Teenager Years (Ages 11 to 17) – Teach high-level cash flow management by giving kids cash to learn about spending and saving. Introduce high-level budgeting to keep track of expenses for purchases they make. Set up a bank account so kids can see how balances can grow with saving. Consider the use of a GIC to teach about interest. Use debit cards to demonstrate how quickly and effortlessly money can be spent, preparing them to better manage credit cards later in life. Encourage a part-time job to help them learn to earn money and pay taxes. Assist kids in filing a tax return if they have a part-time job, not only to teach about financial obligations as an adult but to also potentially create RRSP contribution room and a future tax deduction.

• The Young Adult Years (Ages 18 to 24) – Introduce credit cards (and teach about the dangers of debt!) and ensure that kids monitor their monthly accounts to learn how debt can quickly accrue. Teach kids about the value of a credit score and the importance of building credit for the future. Help young adults set financial goals for savings and education. Teach about investing through a TFSA, FHSA, or other accounts to encourage saving for the future.

• The Adult Years (Ages 25+) – Support discussions on career, home purchase, marriage and families/kids. Provide counsel on setting short, medium and longer-term goals. Have family discussions to prepare for a future wealth transfer. These don’t need to provide in-depth details about your finances, but instead can be higher-level meetings about shared values, succession planning or eventual estate planning objectives.

Don’t Know Where to Start?

If you aren’t sure where to start, we are here to act as a resource. Here are some ways we have supported clients and their families with wealth management and investing education:

• Helping youngsters set up financial accounts – This may include an in-trust or small investing account to teach the value of saving and investing. This might include purchasing a GIC to learn about interest income, mutual funds, ETFs or relatable shares (i.e. Apple, Royal Bank, Disney, etc.) to learn how equity markets work.

• Meeting with family members – This can help family members understand our role and the services we provide: wealth management expertise, objectivity, planning, and advice to simplify your life.

• Supporting young adults to open registered accounts – This includes TFSAs, FHSAs, RRSPs, supporting young adults in setting goals and treating them as individual clients to foster independence.

• Facilitating family meetings for generational planning – This may involve recommending experts to help facilitate family meetings. Transparent conversations about money can help to ensure a smooth generational transfer of wealth and shared goals.