The birds and the bees may not be the only difficult conversation you'll be having with your kids, discussing money and finances with your children can be just as challenging. Given the lack of mandated financial literacy courses in Canada, parents can fill the void by teaching financial concepts to their children early on.
With Statistics Canada reporting that Canadian households are holding more than $1.65 in debt for every dollar of annual disposal income, it comes as no surprise that understanding financial literacy and practicing economic prudence needs to be a priority for all Canadians.
And why not start small -- in size that is.
With tuition prices and cost of living rising, children need to be better equipped to independently navigate these murky financial waters. Here are three easy ways to infuse financial literacy into your child's daily surroundings:
1. Go shopping
This first tip is fairly self-explanatory, however it's not what you shop for, it's how you shop. With young children, be sure to explain and discuss purchases before you even step foot in a store. Use visuals to help children understand the amount of saving that is required before purchasing. In the world of tapping and swiping to pay, it is easy to forget the value and feel of physical money. Jars or envelopes are easy methods to visualize the physical savings required to purchase groceries, clothing or transportation.
Better yet, have your child do the shopping. Providing a small allowance or wallet with spending money will ensure that they have experience handling money. Taking a trip sometime soon? Why not use this opportunity to teach your children about prioritizing their own spending money. While on the trip provide your children with their own spending money for them to manage. This will help them prioritize what they really want to spend the money on.
As kids grow older, consider opening up their own account to ensure that they are comfortable with banking. Whether online or in-person, they will be able to familiarize themselves with financial institutions early on.
2. Save Early and Often
Regardless of the age, implementing good habits early on is always a priority and saving is certainly one of them. If providing an allowance to your young ones, be sure to provide an old-fashioned piggybank to make collecting money in one place an attractive and fun option.
When it is birthday time and envelope gifts are given, have children save at least 10 per cent of gift money. That way they can grow their savings over time. For older kids, start teaching them how to gain compound interest overtime or how to apply for a Canada Learning Bond.
3. You can't have it all
You want your child to have it all, however sometimes prioritization is necessary to encourage the development of clear spending goals. Whether it's post-secondary education, a car or even an Xbox, children need to be reminded of their financial goals. Visual reminders are useful tools to encourage planning ahead and sticking to a long-term goal.
Why not take things a little further by opening up a savings account for older children, particularly one where automated saving programs can be applied to help them reach their financial goal.
Of course, teaching financial literacy is not as easy as three steps. As with any part of growing up, mistakes will be made, however introducing financial planning early on provides children with a strong foundation that will lead the way to financial independence. Time to start talking.
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