Three Tips for Teaching Teens About Money & Investments
By Cindy Marques, CFP
Co-founder and CEO of MakeCents, a Financial Coaching company for Canadian Millennials.
Teaching teens to save their money can be challenging – especially when they live in a digital world dominated by online “influencers” who live lavish lifestyles that seem to come easily so long as you keep going viral. It’s no wonder that teens and young adults feel so much pressure to keep up appearances and are ever eager to make an impression online. Offline, however, there is a cost to all of this: from the brand name clothing to the expensive brunches and dinners (all for the sake of capturing a photo that will garner enough ‘likes’), the reality is that the average social media user is not going to earn a living from simply posting staged photos or TikTok dances. So how can we encourage young adults to fight the online allure and not only save their money, but invest it?
Perhaps the key is to appeal to their desire to be as financially free as the influencers they aspire to become. True wealth, and ultimately financial freedom, doesn’t come from a single savings account or cash tucked in a shoebox under the bed. Financial independence is earned through consistent investing and, while this doesn’t happen overnight, teens and young adults do uniquely possess a very powerful gift as investors: time.
The earlier you begin having these conversations with your teens, the more time they’ll have to wrap their heads around the concept, ask questions, and make the mistakes they can learn most from while there is less at stake. Granted, many grown adult Canadians still lack sufficient financial literacy for themselves. So, as a parent who may also be learning themselves, how can you support your teenager with the appropriate resources and guidance to get started with investing? Here are three quick and smart ways to go about it.
- Explore money management as a family.
Start having conversations about money out loud. When you’re talking about paying bills with your partner or deciding whether to buy one product over the other at the grocery store, narrate your thought process out loud for your kids to overhear. Money shouldn’t be a taboo subject, and until financial literacy becomes more deeply embedded within school curriculums, the subject remains shrouded in mystery if it’s not addressed early on at home.
- Take advantage of interactive learning tools.
The Government of Canada has an entire database of financial literacy resources available online for free. Explore the Canada.ca website for a wide range of user-friendly learning materials and interactive tools for a hands-on learning experience. You can create a budget together with your teen, crunch the numbers on investment goals, explore what it takes to qualify for a mortgage, and even use tools that help you compare Canadian Banks to see how their savings and investment accounts compare.
- Illustrate the power of compounding.
The best time to start investing was yesterday, and the next best time is right now. When it comes to investing, time is the key ingredient to let compounding work its magic. The sooner you start contributing to your investment accounts, the less you’ll have to set aside overall. Take advantage of an online investment calculator to illustrate the difference to your teen what investing looks like when savings being at their age versus your own, as this is sure to drive the point home!
For an example of compounding that you can share with teens, consider this: Two friends decide to contribute $500/month, invested at 8% per year. The first friend starts at age 20, stops contributing after 10 years, and lets it sit and grow until retirement. The second friend starts at age 30 and continues to contribute until retirement at age 65 (35 years total). By this point, the first friend has amassed $1.34M while the second friend is left with $1.08M – even though they contributed 3.5x more!!
These three steps are a fantastic way to start the learning process and prime your teen to become a financially savvy young adult, but truthfully the learning never stops. With student loan debts at an all-time high, don’t let your teen’s first encounter with money management be crippling debt loads and a bombardment of credit card offers from kiosks on college campuses in exchange for a swag bag of trinkets! By encouraging the right conversations and providing the right resources, you can create financially literate kids who will become financially empowered adults.
Cindy attended York University in pursuit of a Physics & Engineering degree seeking to become an educator. It wasn’t until graduating that she realized she was ill-equipped to face the challenges of adulthood without a working understanding of the Canadian Financial system and general financial literacy, which was never addressed in the Canadian educational curriculum she grew up with. She looked around and realized her peers were facing a similar challenge. It was at this point that she made the commitment to pivot and pursue Finance. She spent the next 4 years studying all things money and entered the industry as a Financial Advisor in 2016. However, she was faced with yet another challenge: the industry was seriously outdated in its approach to working with younger individuals – the demographic she was committed to serve.
In 2019 she left the “traditional” advisor world to focus on building up her independent brand, providing fee-only advice to Millennials seeking genuine and unbiased guidance. In Spring of 2021 she co-founded MakeCents, a Financial Wellness company rooted in Financial Literacy and coaching services for young Adults who are undergoing major life changes and starting businesses of their own.