BMO's Financial Tip of the Week: Begin Teaching Children About The World of Finance and Investing at Home
TORONTO, ONTARIO--(Marketwire - Sept. 5, 2012) - As part of BMO Financial Group's ongoing commitment to financial literacy and 'Making Money Make Sense' for Canadians, BMO is releasing a financial tip every week in 2012.
BMO's Financial Tip of the Week: Learning doesn't have to stop when the school bell rings. Teach kids the basics of investing, the importance of setting financial goals and saving for the future, at home.
BMO InvestorLine offers tips for parents on how to teach their children about saving and investing at any age:
The Early Years: The Value of Saving (suggested ages: 5 to 9)
As soon as children start to collect a few coins and understand the value of money, open a savings account for them:
- Introduce them to the concept of having a bank account and how money in a bank account earns interest.
- Focus on a specific goal (such as buying a video game or a bike). This can make it easier for kids to set aside the money. Suggest children save at least part of the cash they receive on birthdays, holidays or from jobs for something they really want.
Taking Action: Learn the Marketplace (suggested ages: 10 to 12)
Once the basics are in place, it is time to start learning about investing:
- Educate children on the concepts of the stock market, financial risk and the importance of having a balanced investment portfolio. Use language they understand and keep to simple concepts.
- Show them how to read stock prices in the newspaper's financial pages or online. Decide together how frequently they will check the stock prices (once a day, once a week) and how to keep a stock price log.
- As homework, have them track the stock prices of a handful of familiar companies, such as Walt Disney or Tim Horton's, to make the exercise more interesting and personal.
- If you have an online investing account, walk them through your portfolio and explain to them the rationale for your portfolio's composition and any trades/changes you make.
Getting Real: Becoming an Investor (suggested ages: 13 to 19)
Now that the groundwork has been set, have kids invest a small sum of money in a few stocks they were previously tracking.
- Consider setting up a custodial account and having the child contribute part of his or her savings. With BMO InvestorLine, parents are allowed to set up an account on behalf of children who are under the legal age of majority.
- Teach kids about the different savings and investing instruments available to them, such as: a Registered Education Savings Plan (RESP), used to save for post-secondary education; a Registered Retirement Savings Plan (RRSP), for saving for retirement; and a Tax Free Savings Account (TFSA), to build up a contingency fund or save for a larger purchase such as a post-graduation trip or car.
- Explain that the earlier they start saving, the more time their money has to grow.
For more information on investing, please visit www.bmoinvestorline.com.
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Rachael McKay, Toronto
Valerie Doucet, Montreal
Laurie Grant, Vancouver