BMO SmartSteps^® for Parents

The Chinese New Year brings ancient celebrations and customs to communities across Canada. One family tradition is for parents to give their children a gift of paper money in a red envelope — red being the traditional colour of luck. Even if you don’t celebrate Chinese New Year, the holiday is an opportunity to discuss different cultures’ attitudes toward money with your children. These cultural differences can teach us (and our children) a lot about managing our own funds.

One of the key financial concepts you’ll likely be teaching your kids is to save for a rainy day – to establish an emergency fund. A great way to encourage them to do that is by setting an example and opening a Tax-Free Savings Account (TFSA). Not only does a TFSA provide an easy way to put money aside for unexpected expenses, it also can be used to save for long or short-term goals – tax-free.

To a young child, a bank can seem like an intimidating place. “It doesn’t need to be like that,” says Alyson Schafer, parenting expert and bestselling author. We asked Alyson for some suggestions on how to talk to kids about the bank and explain what it does in simple, age-appropriate language in order to lay the groundwork for a positive banking experience as they get older.

Start with the basics

“Start by telling your kids about the awesome things banks do,” says Alyson, for example:

•    Keep money safe.

When seven-year-old Jaxon wanted to buy a different brand of cat treats his mom, Trisha, wondered why. “Turns out, the illustrated kitty on the package loved the treats so much, his eyes had turned into spirals,” Trisha laughs. “Jaxon wanted to see Scooter’s eyes do the same thing.”

Even though Scooter liked the treats, “His eyes didn’t morph into psychedelic spirals” continues Trisha. “Jax was disappointed, but I wasn’t.

Parenting expert Alyson Schafer remembers her young daughters having a genuine “Eureka!” moment when they discovered an item they wanted to buy was 10% cheaper online than it was at the mall. Alyson laughs as she recalls, “They didn’t even mind waiting for the delivery because they got to keep more of their money in their piggy banks.”
Not only did the girls learn the value of comparison shopping but they began to recognize that by exercising a little patience, they could save even more.

As the old saying goes: “The best time to plant an oak tree was 20 years ago. The second best time is today.” That logic also applies to Registered Education Savings Plans (RESPs). Here are six reasons to open an RESP if you haven’t already – or to beef up your contributions if you do have an RESP.

As tough as it can be to witness, children learn by making mistakes. So you need to expect — and permit — your kids to make some questionable purchases. Relax in knowing that it’s just part of the journey toward understanding that you get what you pay for.

According to parenting expert Alyson Schafer, when faced with one of these frivolous purchases, parents need to acknowledge that the concept of value is very subjective. “Ask yourself how many pairs of black shoes you have.

We all have some memory of borrowing books from our public library — and paying at least one overdue fee. That was probably the first money lesson we had outside of our immediate family. But that’s not the only money lesson the library can help teach your child.
Try using the following scenarios to help instill good money habits while fostering a love of reading and learning:

Getting a card. A library card gives your child something with their name that gives them special privileges, as long as they follow the rules. 


Just as getting a learner’s permit for driving is a rite of passage for 16-year-olds, opening that first bank account is a milestone for younger kids.  Making that first deposit is also an important step in learning how to save – an essential skill for a successful financial life.  

By the time kids are seven or eight, they have a pretty good understanding that we must pay for items like food, clothing, and school supplies. One of the benefits of bringing kids along on shopping trips is that it gives them an opportunity to see you paying for every purchase.

But there are many things parents pay for “behind the scenes” – from swimming lessons and ballet classes to summer camp and Cubs – and it’s important for kids to understand that those activities aren’t free.

Appreciating what you already have, instead of focusing on what you don’t, can be a key factor in maintaining control of your money throughout your life. Since your seven- or eight-year-old can absorb your attitudes, consider making gratitude a top one. Parenting expert Alyson Schafer offers advice every parent should hear.

The year of my daughter’s eighth birthday, our family was tight for money.  Full of birthday excitement, she kept pushing me to make birthday plans.  

“Mom, can I take all my friends to a movie for my birthday?”  
“No, we can’t afford that,” I’d say, wanting to be practical about the family budget.
“Mom, can I have a magician?”
“No, we can’t afford that either.”