Financial literacy (education) builds skills for children to have a healthy relationship with money and provides a start toward financial organization. Financial education provides an opportunity for parents to communicate the family’s values to their children. Financial literacy helps children understand the various structures their family may have (such as trusts or holding companies), how those structures function, as well as the child’s role and responsibilities in relation to those structures. This increased awareness and understanding of how the family’s resources function facilitates buy in from the younger generations that will continue to champion the family’s values and mission. A person’s financial literacy has an impact on their attitude toward money and its capabilities but more importantly it has an impact on the values and work ethic they will carry throughout their lives.
The Ontario provincial government began introducing mandatory financial literacy into high school curriculums in 2011; Quebec will be introducing a financial literacy course into high schools as early as 2013. There are a variety of online resources for financial education for children, many of which are tailored for various age groups. Many banks offer special websites and introductory savings accounts for children.
However; research by the “Family Office Exchange” (a global community of wealthy families and their advisors), showed that a majority of both teens and parents found that parents are a teen’s primary source of information about managing money and finances.
Financial literacy, like any skill development is a process, it takes practice, and thus financial education should also be a process rather than a series of one-time events. It may be useful to anticipate possible stumbling blocks to maximizing the benefit of financial education for the next generation. Many of us were brought up to not discuss money which may make the beginning of the process somewhat awkward. Don’t be afraid to discuss your approach to money, even if you don’t feel that it is perfect. Children learn a great deal about our attitudes toward money from our behaviour even without actively discussing it. Consider establishing measurable outcomes so that you can track your child’s progress toward financial literacy.
Research by the Family Office Exchange found that “financial literacy helps develop responsible family stewards for the future.” It also increases “The likelihood that children will take an ownership role in maintaining the family’s vision and goals.” Financial literacy not only benefits your child as an individual but it is a benefit to the family and its legacy.