As a parent and as a teacher, I grapple daily with the question of how to seed the experience and knowledge for kids to become financially responsible adults. Instinctively, and for several years now, I have been experimenting on my kids by empowering them to make purchases, research buying decisions, invest their money in family projects, give to charity and save for things they don't know they want today.
My firm belief is that if my kids are to become financially savvy young adults, they must have diverse and varied experience with handling money as soon as they can understand what it represents. If this education is absent, there are some clear dangers in navigating life's money minefield.
From my vantage point as I work to shape the financial literacy programs offered by JA Canada, I see four risks for young adults if they don't have a solid portfolio of financial experience as children.
Dependency
To me, dependency is the opposite of freedom. To have a fulfilling life one must feel that one has the power to make decisions that create the life one wants to live. Living paycheque to paycheque happens when you run out of cash before paying bills, buying food, or rewarding yourself. I recall vividly how incredibly stifling this situation was emotionally and spiritually when I was a university student. The last thing any parent wants for their child is financial dependency on them well into adulthood.
Skewed Values
Today's consumer landscape is confusing. Young people are constantly being influenced by various and sophisticated messages designed to channel their desire to buy. This unchecked consumerism contradicts any instruction a person might receive about saving or fiscal responsibility. Without intervention with the full weight of your parental influence, kids risk developing unrealistic and unhealthy expectations that they are entitled to the latest trends. Worse yet, they may learn happiness is dependent on full participation in rabid consumerism.
Constraining Debt
On a weekly basis, I hear of more reports that Canadians are carrying record levels of consumer debt. With interest rates seemingly locked down below the rate of inflation, many rational adults succumb to their desires to improve, redecorate and upgrade. Of course, there are solid financial reasons to leverage credit to create stability (i.e. mortgage) or capitalize on real opportunity (i.e. postsecondary education), but kids without money smarts will have trouble seeing the constraints and potentially paralyzing effects of unhealthy debt on their future options.
Sinking Self-Esteem
Without positive money habits, the risk of a big financial mistake in young adulthood is higher. The cascading consequences of such a circumstance can turn the confident and empowered into the shaken and demoralized. It would be hard to quantify the long term, compounding effects of a false start to adult life, but surely this something we all would like to mitigate for our kids.
Of course, it's not all bad. The opportunities in equipping kids with money mojo far exceed the dangers of not doing so. This is the spirit of Financial Literacy Month and the motivation of the thousands of volunteers who deliver our JA Dollars with Sense program in Canada. Together we are striving to be an upstream solution to the risks I see above.
As always, I am interested in your thoughts and reactions. Why is an early financial education important to you? What perils are you preventing by equipping kids with money mojo?
Stephen Lippa,
Vice-President, Education & Digital Strategy
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