Start young: five lessons for managing money
The Canadian Foundation for Economic Education (CFEE) recently relaunched its Money and Youth program, a partnership between IG Wealth Management and the CFEE, which is designed to help youngsters handle their cash better and boost their financial confidence.
The first is to understand the trade off – the ability to learn that every financial decision means you have to give up something now or in the future that you otherwise would be able to have. Rabbior believes this is arguably the most important.
The second point involves having the ability to set a goal … and then achieve it. He added: “What’s important is for parents to teach a sense of self-efficacy.”
Young people can learn to save from their allowance, for example, which will help them achieve bigger goals later in life with the confidence that they know how to get it done.
The third element is the much-repeated mantra: learn to distinguish between a need and a want. Rabbior explained: “This is something to consider at the same time you are considering a trade-off. Maybe if it’s a want, you defer to the future and you set a plan to get it but you don’t necessarily over-extend yourself now to get it.”
Then, and this is a modern concern, young people in 2019 have to understand who the influencers are in their life? Who is it that’s going to be encouraging you to buy or borrow? And what kinds of methods and techniques are they going to use to do that?
It’s an area, said Rabbior, where the protagonists are becoming more and more sophisticated, armed with a wealth of research and data.
“They know what impacts people's decision-making and they know how to get somebody to feel that they want that next iPhone rather than need it.
“They know how to elevate people’s desire for things and I think in schools and among the younger generation, if we can alert them to not only who is trying to influence their decisions, but how they're influencing their decisions, we can do a better job of helping them set their own limits.”
He added: “A lot of the work we're doing with older Canadians is sort of remedial, they've got themselves into these situations. We can do a lot of preventative work with young people – alert them before they’ve made decisions. We can do an enormous amount for young people in that area.”
The final lesson is impressing upon youngsters the importance of setting their own limits and living within their means so they don’t step over the boundaries into areas of stress and anxiety where you are always wondering how you're going to get by.
“If somebody's offering you a $10,000 limit on your credit card, and you know you couldn't handle that, then you only accept the $5,000 limit. If somebody offers you an $800,000 mortgage, and you can only afford a $400,000 mortgage, set your own limit.
Know what you’re comfortable with and what you can manage because a lot of the time, there will be those offering you limits on debt beyond what you're comfortable with and, in some cases, perhaps even beyond what you can comfortably afford.
“It comes back again to setting those limits, especially in this world, where the incentive is so strong to borrow.”