By Michelle Statz

BDO Debt Solutions

Children and Financial Literacy Education

Sep 29, 2021 | 1:57 PM

As a Licensed Insolvency Trustee, I meet with people on a regular basis to assist with their financial challenges. The discussion inevitably includes a conversation around budgeting and using credit. It is not unusual to find that some are not entirely sure how to use or implement a budget. Furthermore, the use of credit and its cost and impact is often misunderstood. For example, keeping up with minimum payments is not necessarily a positive thing and may actually be a warning sign of financial difficulties. A common complaint I hear is that many of these issues are not taught to us when we are in school. We need to have an educational system that incorporates some basic financial literacy information so that our children are growing up to understand what a budget is, and that a credit card is not free money.

This can start at a young age with teaching children the difference between needs versus wants. We can all relate as children, we wanted certain things when growing up, i.e. the new toys, the name brand backpacks or clothing, the things that our friends all had. This is the perfect opportunity to teach your kids about what is affordable, and that we cannot have everything we want. We are on a budget. It means explaining that concept to our kids so that they understand that there is only so much to go around. Including them in the budget decisions so that they understand they may have to choose depending on cost, will help them greatly down the road as adults when they make their own budget and set their own priorities. Christmas can also be a time of year when we need to choose and kids should understand they cannot have everything on their list.

Creating a budget is the first step. It is important to understand your spending and what you need to cover your cost of living. The second part is teaching your kids about using credit. Credit is a useful tool but it can also be misused. It is important that your children understand that obtaining that first credit card does not give them access to free money. When your child graduates and gets into post-secondary schooling, they will likely be approached about applying for a credit card. A credit card is not meant for long term debt, and carrying a balance means you are incurring high interest charges on your outstanding balance — many young adults are unaware of how this works. Budgeting and using credit are concepts that need to be shared with your kids.

This very basic information in my view should be incorporated into our educational system. We are hearing of more instances where this is occurring, but I believe it needs to be a staple in the curriculum.

There are always unforeseen life events that are outside our control and these can affect an individual’s financial situation. There are solutions to those debt issues. In the meantime, let’s ensure everyone has the same basic starting point in terms of what they do have control over — understanding their budget and spending.

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Michelle is a Licensed Insolvency Trustee, and a Chartered Insolvency and Restructuring Professional. She is a Vice President with BDO and works out of the Regina office. She has been in the industry since 2001 and believes in the system that allows individuals to find solutions to their financial challenges so that they can take charge of their finances once again.

If you are having trouble making ends meet each month, finding the right debt solution can help. Visit the BDO Debt Solutions website for more information about bankruptcy, or call 1 855 BDO DEBT to book a free, no obligation consultation.