By Ashley Land
Like many of you, raising my family has been my greatest joy as well as my hardest job. We all want the very best for our children and our family. We want them to be happy and successful. We want to give them everything they need. But at the same time, we want to be thoughtful parents who raise considerate, independent children who care about more than themselves and have an authentic desire to contribute to society.
This is why good parenting requires deliberation and planning.
I want to share with you five common money mistakes parents make while raising their children. I call them mistakes because they have the potential to undermine those primary goals of independence and consideration for others that parents have for their children or to cause financial hardship within the family.
1. Spending too much on kids
Today’s children have so much choice in terms of extracurricular activities, toys, unique travel and exciting experiences. Yet all of these options potentially come at a cost. Often, parents get caught up in the peer pressure they feel to buy things, enroll their children in activities, or participate in extravagant holidays. They see what neighbours, friends and other parents are doing, and they fear their child will be left out.
It’s important to take the time to evaluate how much you are spending and what drives you to do so. Also, talk to your child about what they do and don’t care about. Be deliberate in your choices. Don’t overspend or overschedule your family, which just creates burn out for you, your spouse, your children and your pocketbook.
2. Giving kids everything they want
A part of raising good kids is to teach them about work, value and gratitude. To achieve this, you just can’t buy your child everything they ask for. Instead, provide money lessons. Teach your children how to earn money by creating a lemonade stand, organizing a garage sale, or starting their own snow removal company by shovelling the neighbours’ driveways. There are endless possibilities. This will teach them responsibility, and then you can also show them what good savings habits look like.
Encourage them to save up until they have enough money to purchase something, they want themselves. Or encourage them to save a portion of their earnings and spend the rest. Your children will appreciate both their purchases and their growing savings when they understand how long it takes to earn a dollar, save up for a particular item, or create long-term savings.
3. Prioritizing your children’s education savings over your retirement
Often, parents prioritize their children’s education over their own retirement plan. While you want the best for your children’s education and future career, a true gift to your child would be to adequately prepare for your retirement first. Save it, automate it and prioritize it. This helps you and your kids out in the long run, as you will be secure in your retirement and likely also able to help them out on occasion.
You can always borrow money for your children’s education. But you cannot borrow money for your retirement.
Once you are able to do so, contribute to your Children’s education savings plan. The government offers grants and incentives to do so. No matter what your income, the Canadian Education Savings Grant (CESG) is money that the government adds to an RESP, representing 20% of annual contributions up to an annual maximum of $500. The lifetime CESG is $7200 per child.
4. Not having an estate plan in place
I have seen the unexpected happen. While grieving the loss of a loved one, family members struggle to locate a will and settle an estate. This is both stressful and emotional for the family left behind. Make sure you have in place a will and powers of attorney for both property and for the care and guardianship of your children. Having an estate plan in place will protect you and your family and provide peace of mind.
5. Not having enough life insurance
While it’s tough to have to think about your own mortality, having adequate life insurance will relieve the financial stress on the surviving spouse and children. In the early years, when the children are young, adequate life insurance should cover things such as lost wages of the deceased spouse, money for the children’s education, and debt repayment. As a rule of thumb, your coverage should be 12 to 15 times your dependents’ annual expenses.
You can speak to an insurance advisor to discuss your unique circumstances and determine what adequate life insurance is for you and your family.
It’s not easy to know how to raise children well and protect them from harm—whether emotional or financial. I offer these five money mistakes for your consideration. Whatever you decide is best in helping your family get ahead, start planning now. The best start you can give your children is a solid financial plan that teaches them values and also makes it more enjoyable for you to raise your family.
Never Retire Profile of the Week
Barbra Streisand
Two Academy Awards. Ten Grammy Awards. Five Emmys. Four Peabodys. Nine Golden Globes. The Presidential Medal of Freedom. Living on her own from age 16 on—when she graduated from high school—Barbra Streisand always wanted to be a star. At age 18, she began singing in nightclubs. At 20, she was in her first Broadway show. In 1963, at 21, her first album won three Grammy Awards and in 1964, she played Fanny Brice on stage in Funny Girl—a performance that landed her the cover of Time. Wider audiences first saw Streisand in a film adaptation of Funny Girl in 1968, and by the mid-70s she had made The Way We Were with Robert Redford and A Star is Born with Kris Kristofferson. In addition to her acclaimed career in music, plays and film, Streisand has long been involved in politics (making Richard Nixon’s 1971 list of political enemies) and in philanthropy. She established The Streisand Foundation in 1986, which supports the preservation of the environment, voter education, civil rights and women’s issues, including women’s cardiovascular health. Now 78 years old, Streisand continues to act and record albums, is said to be working on her memoir, and has no plans to retire.
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