Financial Lessons for Children

By Anastasia Tsouroupakis

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Way back in February I had read an article in the Huffington Post Canada which reported Canadians had the second highest debt increase in the world; according to Mckinsey Global Institute, Canada had the “second highest increase in household debt, relative to income, among developed countries since the Great Recession”.  I found this stat alarming! My first question was why?  I remember growing up the rule in our household was if you couldn’t pay for it in cash you couldn’t afford it.  I am sure that most of my contemporaries grew up with the same philosophy and yet, as a nation we are still in trouble.  How do we raise our kids to be fiscally responsible?   We did what any other parent would do; Googled it!   There are a wide variety of articles that touch on this subject, and after going through most of them I decided upon three that made the most sense to us and which my kids could get on board with.  I would like to say that  up until this point we didn’t think that we had done such a bad job, our kids (ages 9,13 and 16) do work around the house and the office and we give them an allowance which they spend however they chose.  We had set some ground rules early on, for instance any kind of leisure device gaming stations etc., along with any games, controllers etc., toys, etc, they buy with their own monies.  This of course is not an unusual strategy in fact most of our friends do this, however this is not enough we have to teach them to be more fiscally savvy; their economic survival depends upon it.

  • TEACH YOUR KIDS ABOUT HIDDEN COSTS: The first article we found spoke about teaching your kids about hidden costs. In Canada this lesson is be easily taught using our GST; the Goods and Service Tax of 13%.   Up until this point we would pitch in the tax, but we quickly realized this wasn’t doing them any favors.  When one of our kids (particularly my second son) comes to us and says he has saved $60 and wants to buy a video game that costs $59.99 we tell him that’s great, too bad he doesn’t have enough to buy it.  The first time I said this he was dumbfounded, I told him that on top of the $59.99 he and everyone else must pay 13% so the video game now costs $67.99, an additional $7.80.  After ranting and raving about how unfair taxes are, the fact still remained that he didn’t have enough to buy the video game.  This was his first lesson in looking for hidden costs.
  • Borrowing Money: Financial experts insist we teach our children at a young age about borrowing and repaying loans with interest.  This is a very important lesson because there will come a time in their lives when they will have to borrow money (buying a car, home etc.), and we must teach them that they should only incur debt insomuch as it adds to their assets.  The other day my daughter asked me to buy her an app for $3, I told her I would lend her the money but when she got her allowance she would pay me back $3 plus .50 in interest.  This prompted her to rethink her purchase, the app was no longer worth it.  I also borrow money (I pretend to) from my kids and pay it back with interest, they love this part of the game.  The only problem is that they keep trying to lend me money.
  • Pay Them In Large Denominations: I myself am far less inclined to break a twenty for something than I am a five dollar bill.  I know that once I break a twenty it will be gone in no time.  The same holds true for kids, if you pay them in large bills they will hold onto them longer, because they recognize the larger bill holds more value.  I used to pay for chores immediately with the change I had in my purse, quarters, loonies, twonies, whatever, they would take their change and spend it at the local corner store buying whatever they could afford.  When I started keeping a tally of the chores each of them had done for the week and I paid them in larger denominations (i.e. paper money) they held onto it a lot longer.
  • Delaying Gratification: This is a huge life skill which will be used in every facet of their lives.  I make my kids wait 24 hours before they purchase anything if they still want it at the end of that time, then they may proceed.  More often than not they have forgotten about it and have moved onto something else.  This ritual if you will, prevents them from falling prey to their impulses, and let’s face it, the reason so many of us has so much consumer debt is a result of impulse buying.  By waiting they saved their money which can then be put towards something of greater value.
  • Let Them Keep The Change: On occasion I give my oldest son money to buy lunch, if I gave him $10 and asked him bring back the change he would usually bring back next to nothing.  Once I told him to keep the change he didn’t ask me for lunch money for the rest of the week. The theory behind this thinking is simple, when it’s mom and dad’s money its endless, when its theirs it’s not ; thus they become less inclined to overspend.

Best of Luck

Carnforth Self Storage

Sources:

www.moneytalksnews.com/6-ways-teach-yourkidsmoneysavvy

www.wsj.com/articles/SB120468099339812197

http://globalnews.ca/news/2215081/debt-hits-new-all-time-high-among-canadian-households/

http://globalnews.ca/news/1814419/household-debt-hits-record-levels-says-statistics-canada/

http://www.huffingtonpost.ca/2015/02/05/household-debt-crisis-canada_n_6623322.html

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Should Government be run like a Business

By Anastasia and Michael Tsouroupakis

Canadians are getting ready to elect a Prime Minister, will we re-elect PM Stephen Harper, or will we choose a new path for our country by electing Justin Trudeau or Tom Mulcair.  Let the games begin!!!  During any kind of election, provincial, regional or municipal, the topic of the inefficiency of government always occurs and at least one candidate (usually a business owner or former CEO) proclaims that governments should be run as a business.  To a person who owns their own business this idea in theory is very attractive. The world’s richest business man Bill Gates proclaims, according to him governments are “terribly inefficient” and he regularly criticizes the US government for being dysfunctional because it’s not run like a business.  Gates further explains, it is has no need to function efficiently because there is no competition for the services it provides: for instance there is no need to hire more employees at Services Ontario, because there is nowhere else to go in Canada  to renew your licence, health card etc.  There is no other option BUT to wait in line to get what you need.   A privately owned business on the other hand, cannot afford to have disgruntled customers as they will lose business to their completion.   This in theory is fantastic except for one problem—Government is not a business and its primary function is NOT to turn a profit –the function of a government is to  provide social services and to a lesser degree goods to its citizens and this does not translate into profit.  Libraries, parks, rec centers all provide a valuable  social services but are far from profitable and yet they need to exist as they serve a greater good.  If the government operated services strictly on a profit criteria is ALL business do, these services would cease to exist.  John T. Harvey contributor to Forbes in his article makes an excellent point when he says that many business exists despite their social value, Ashely Madison the dating site for married couples for instance is functional in the business sense because it is profitable, yet its social value is highly questionable.

Recently I found myself at a friend’s house for a BBQ, there were a few of us who were business owners and we began discussing the merits of running the government as a Fortune 500 Business, and while in theory it sounded viable (at this point we had decided to sell off various government assets to improve our bottom line)  a friend of ours who is a social worker joined our conversation and made the following point; not everyone is a small business owner, the government  MUST  represent and MUST benefit all of society not simply the business sector.   This point put a halt to all of our musings for a more efficient government.  She made a good point, libraries and parks do not really turn any kind of profit, so in the business run as a government paradigm they would be the first on the chopping block. Can you imagine growing up or your kids growing up without these community staples?  I know I could not, libraries cultivated my love of reading, and parks are places were the community came to together, children played safely, and parents connected.  Libraries and parks help shape and cement the communities they are situated in, and one of the many roles of government is serve these communities.  The question then is not really “Should government be run as a business?” but rather “Can government be run as an entity which is both moderately cost effective and responsive to its people?”

Sources:

http://www.forbes.com/sites/johntharvey/2012/10/05/government-vs-business/

http://mic.com/articles/29749/bill-gates-says-government-should-be-run-more-like-a-business-why-that-s-a-bad-ideaare

http://www.carnforthselfstorage.ca