Financial Friday #150: What your Teenagers Need to Know About Money!
Money Smarts Learned Early Last a Lifetime
Developing a saving mindset early in life will pay back huge over the course of a lifetime. Kids must learn how to manage their money to build savings as well as understand why they need to save and how to carefully evaluate their spending decisions. Today’s youth are bombarded by messages from the marketplace and they definitely need to learn how to keep the influencers at bay.
Credit is another potential disaster for teenagers. Poor spending choices combined with easy access to credit cards with excessive spending limits (and high interest rates compounded daily!) can derail a future before it even gets started. Failing to understand the impact and obligations of a student loan is another pitfall that can lead to a nasty surprise when it comes time to repay that money.... or get a car loan or mortgage down the road.
It sounds so cliched to say, “make savings a habit” and it really is only half the picture — your teenagers should be saving and INVESTING a portion of their income, regardless of how insignificant it may seem. They need to understand a little about stocks and financial markets, and the effect of compound returns on growing their investments. They must also learn the relationship between risk and return and some options for getting started with a self-directed (DIY) investing account.
If your teenager has a part-time job, they are already somewhat familiar with the taxman, but we will give an overview of taxes and how TFSAs and RRSPs work to put more tax-free money in your pocket... and how an early start will pay off big down the road. We also cover insurance (including coverage for that first car) as well as a module on buying a house and how that process works.
It isn’t strictly about dollars and cents, the course also has an entire section devoted to career/life success and some key factors to keep in mind as they transition into adulthood — goal setting, building a personal brand, self education... even a moving out survival guide!
Resources:
Emergency funds: How much is enough?If the pandemic taught us anything financially, it was too have a little bit put aside. Recently, there is plenty of talk about a recession and if your wondering how much you might need if it all goes sideways in 2023, give this one a read.
Top 3 TFSA mistakes
Aside from not having one, these are the 3 most common faux pas when it comes to maximizing the benefits of your TFSA.
Costly money mistakes you make over and over... without knowing!
Shining a light on common — and often unconscious — money mistakes will motivate you to take action... these are the most pesky and costly ones, along with a few tips to get you on the right track.
How to manage your currency risk as the loonie rises and falls
The loonie was over 80 cents US a year ago and after a recent rough patch is now hovering under the 73-cent mark — depending on your investing timeline an future plans, reducing currency risk may be something you want to look into.
Should you rent in retirement?
Some people rent in retirement because they don’t have much choice; they can’t afford to own homes. But financial planners say renting can make more sense than owning in some circumstances, even for retirees who can afford the costs of homeownership.