Teaching your children about money

Parents who implant the fundamentals of money management in their children at a young age might learn a few useful tricks of their own.

The following tips will help your children learn to save, invest and handle money responsibly. They'll also help you feel confident that you are giving them the greatest possible start in a world with extensive consumer temptations.

• An allowance is an effective teaching tool and professionals say it should not be linked to responsibilities around the house. Use it to make kids responsible for purchases like toys, movies and entertainment.
• A raise in allowance should only be given if the child really needs it. This can be determined by documenting spending and seeing what purchases are being made.
• It’s never to early to start saving. A little money each month, perhaps a percentage of the allowance, can turn into huge savings years down the road. Explain the concept of interest and why it's important to put money away every month. Create incentive by matching what your child puts into the savings account.
• Lead by example. If you're an impulsive shopper or a careful spender, chances are your children will be too.
• Inform children of your own spending. Discuss why you made a purchase of one product over another. Involve them for increased understanding.
• Encourage children to invest in their own business such as yard work or babysitting.
• Introduce your child to investing with a mutual fund* that they will recognize. This can slowly and safely teach them about tracking stocks and linking current events to fluctuating prices.

Growing up with a credit card

Used responsibly, credit cards can be valuable in an urgent situation and for establishing a credit history. But you and your child should completely understand when card use is appropriate. Here are a few tips for new credit card users:

• Be careful of teaser rates: Credit card companies sometimes present low introductory rates to draw students. These rates usually last for only a few months, and then soar to 18% or higher. Persuade your child to evaluate offers before selecting one card.
• Set a one-card limit: There is no reason your student needs more than one card. It is much simpler to pay one bill at the end of each month.
• Pay entire bill every month: It's a good idea to get in the habit of paying the balance-in full-each month. Interest charges can become overwhelming when you only pay the minimum amount.
• Pay on time: Internet accounts allow for payments at any time. If paying by mail, post the payment several days, or even a week before the due date. Late penalties are expensive and some companies boost the interest rate after one or two payments are behind schedule.
• Avoid cash advances: Make sure your child realizes that interest is charged on cash advances, beginning at the date of withdrawal. On occasion, the rate of interest is elevated on advances opposed to purchases.
• Protect your credit history: Late payments or non-payments can affect your child for quite some time. This could affect the child's ability to buy a house, get a job, or buy a car.
• Do not exceed the credit limit: Penalties are common if the limit is surpassed.
• Review statements carefully: Credit card fraud is increasing. Your child should hold on to the receipts for every purchase and check them against the statement. The company should be contacted if any discrepancies or unrecognized purchases are present.
• Protect personal information: Unless your child makes purchases using a telephone or online, the credit card number should not be revealed to anyone.

The importance of a will

Roughly 70% of us do not have a will. A person without a will has lawyers for heirs. This means the courts have the power to assign your property to who they see fit. Wouldn't you prefer that your family or friends inherit what you amassed in your lifetime?

By making a will you can determine who will control your property after you pass away. A will recognizes the persons or beneficiaries that will acquire your estate and it minimizes estate expenses that your heirs will have to pay out of your estate. In the case you pass away without a will (intestate), legislation and the courts will determine who your beneficiaries are, and how much they get by a formula.

If you pass away without a will and with no recognized relatives, after a certain amount of time, your estate goes to the government. In the case of having young children and a previously deceased spouse the court will appoint someone to care for your children. Their definition of a suitable guardian may not be similar to yours.

In many cases, only a simple will is needed. You can get forms and self-help information at your local stationery store. In other cases, where your estate is more complicated, you should contact a lawyer. For example, if you have a child with a disability/special needs or children from an earlier marriage who are not accepting of your current spouse.

*Mutual Funds are offered through Credential Asset Management Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise stated, mutual fund securities and cash balances are not insured nor guaranteed, their values change frequently and past performance may not be repeated. ®Credential is a registered mark owned by Credential Financial Inc. and is used under licence.