15 Nov Financial Literacy Month: Thoughts From Your CPA
By Grant T. Smith
I am totally stoked. (“Is that a thing people say? I would not want to look silly,” said the man who may be sporting a pink moustache in a month).
I had written my article for this section and was going to hit “send” as soon as I got home last night. On the way, I was listening to On the Coast waiting for traffic to start moving along the #1. I was surprised to learn that November is more than just “Movember”; it is also Financial Literacy Month in Canada.
So, thanks to Gloria Macarenko, Gill Deacon and Bruce Sellery, for a great story about teaching financial literacy for kids and for inspiring this article. If you want to listen to Bruce and Gill, you can go here, it runs just under six minutes.
Before I talk about the lessons learned on the radio, and how to support financial literacy at home with your kids, I will share how I learned to respect money.
When I was eight years old, I got my first newspaper route. Back then, things were a bit different. For instance, people still got a daily paper, which they read. How sad it must be to grow up without the Saturday coloured comics. At the end of each month, it was the delivery person’s responsibility to collect the money owed by our customers. We had to do that because the newspaper sent us a bill each month to pay for our newspapers and if we did not collect the money, we would have to make the payment from our pockets. We could start collecting on the 15th and had to pay our bill by the 25th or the newspaper started charging us interest. At eight, I had to understand financial obligations, accounts receivable, operating expense, and interest expense.
Only as I write this do I realize, for the first time, that I was not paying income tax, as a sole proprietor – oops.
Let me fast forward (is THAT still a phrase?) to today. Since you cannot get your eight-year-old a paper route to learn about finances, what is left?
I really enjoyed Sellery’s assessment that the first thing your children need to learn is living within your means. It is one of the great fundamentals – really so obvious – but lost to many adults in this age. Teaching your children to do this means examining choices and Sellery points out three:
- Understand the difference between a need and a want. This is the first step as it allows you and your child to examine the critical nature of why the item is being sought.
- Make trade-offs to achieve the goal. One of the best parents I know constantly focuses on Craigslist with his children to see how they can get the same item for less. If you need something, maybe it does not need to be new, or maybe it can have less special features.
- Increasing your means is the final choice if you must obtain something. Achieve this by earning more money, or by saving until you have sufficient resources.
I am interested by the idea that you might provide interest to your children on amounts saved. This seems to have some real merit because if your child can save money (perhaps in a dedicated wallet) and get a few extra coins or dollars in interest over time, they will see real merit in saving.
But the key take-away from the podcast is that we should be talking about money. I hope that this little article can help start your dialogue.