A recent September 2021 Ipsos survey conducted on behalf of The Toronto-Dominion Bank (TD) ahead of Financial Literacy Month in Canada, reveals that one-third (33%) of Canadian parents surveyed aren’t confident they’re setting a healthy financial example for their children. The survey also reveals that only 29 per cent of Canadian parents surveyed consider their household to be in “excellent” or “good” financial health” – which includes the ability to pay bills on time, carry manageable debt, have short and long-term savings, and a financial plan.
“Parents can be the biggest influence on their child’s financial know-how, yet our survey shows many aren’t sure about the kind of example they set for their kids when it comes to money management,” says Jennifer Bishop, Head of Financial Health & Education at TD. “Asking for help when it comes to managing and talking about money can be an important step towards improving financial health. Speaking to a financial advisor can help a parent be better prepared to have the “money talk” with their children and support the development of healthy financial habits.”
Bad Budgeting Habits
Having and maintaining a budget is a fundamental behavior to achieving good financial health, yet the TD survey reveals that nearly half (45%) of Canadian parents surveyed say they do not set a household budget. Setting a budget now can help set the stage for responsible financial behaviours in the future, especially for older teenagers who are looking to leave the nest and are taking on their own financial obligations like saving for post-secondary education or making their monthly cell phone or car payments. That way, before this age group flies the coop, they will understand the benefits of putting in the effort to create a detailed budget.
According to the TD study, of the parents surveyed that do have a household budget, only one-in-four parents (25%) believe they take a thorough approach to their financial planning – indicating most households aren’t planning for the unexpected.
“If the pandemic has taught us anything, it’s how important it is to have a household budget that includes setting aside funds for emergencies,” says Bishop. “The unpredictability of the pandemic has shown us that it’s important to plan for the unexpected. It is also a good opportunity to start the money conversation with our children, as it can foster healthy approaches to budgeting for parents and financial independence for children.”
Wants vs Needs
An allowance is a great tool to help younger children – for example those under 13 – understand the concept of money and budgeting. According to the TD survey, nearly a quarter of parents surveyed give their children an allowance for completing household chores (21%) or as a reward for good behaviour (5%).
When it comes to parents with kids aged five and up, 28 per cent of survey respondents say their child does not know the difference between a want and need. “Kids will often see something, like candy at a check-out, and want it immediately,” says Bishop. “These are good moments to teach kids the concept of needs versus wants, and that money is finite. If we buy the chocolate bar now, we won’t have enough money to buy that toy you really want.”
When to have the “money talk”
When it comes to having the money talk, the TD survey reveals a lack of consensus on timing. One quarter (25%) of Canadian parents surveyed don’t regularly talk to their children about money, with the primary reason being that they feel their child is too young. Other reasons for not talking about how to manage money include not believing it’s an important topic for kids or not something they need to worry about (12%), because they’ll learn about finances in school (11%), or because it’s a taboo topic that shouldn’t be discussed with anyone (4%).
The survey also reveals that conversations about finances between parents and kids are often reactive. Among surveyed Canadian parents, the most common catalyst for these conversations is their child receiving money as a gift (27%), when the child shows interest or asks questions (20%) and when they start getting an allowance (19%).
“It’s never too early to have fun, creative and open conversations about money with your kids. From counting coins in a piggy bank to opening-up a first bank account and looking at the account activity together, there are many ways to involve kids in managing their finances,” says Bishop. “Financial education is critical, and when children learn to manage money at a young age, they are more likely to have a long-lasting responsible and healthy relationship with money as adults.”
Building Financial Confidence
As a long-time advocate and supporter of financial education, TD has several sources of information available as follows:
- TD Ready Advice provides information and articles on a variety of financial topics, from how to keep track of day-to-day expenses to how to navigate the first-time homebuying process.
- TD advisors are available at our TD branches across the country to help provide personalized advice and help customers with their financial goals.
- Learn more about how we are supporting Financial Education in communities across Canada and the United States by visiting The TD Ready Commitment Financial Literacy page.
- TD recently announced a CDN $10 million commitment to the Black Opportunity Fund, where part of the funds will go to Black-serving community and non-profit organizations focused on areas of financial security.
SOURCE TD Bank Group