THIS FIRST CHAPTER is about understanding the context in which kids learn about money; it discusses some of the problem areas that parents run into and suggests approaches to deal with those problems effectively. It also discusses the Ten Healthy Habits of Financial Management, which can help you achieve two objectives: getting your own finances in order and teaching your kids how to do the same.
We all want to raise our kids to be healthy, happy, successful adults. We want them to be able to manage their lives well, including their financial lives, for their sakes as well as our own. If we don’t succeed in teaching our kids about money management, it may come back to haunt us. How would you feel, for instance, if you had to support your adult children financially? Or if you had to bail them out of a financial mess, like bankruptcy or an expensive divorce, with savings painstakingly accumulated and set aside for your own future? What if this happened when you were supposed to be enjoying your carefree retirement years? It’s not a pretty picture, is it?
Those are some of the potential consequences for us as parents, but what about the kids themselves? Healthy, happy and successful adults, among other things, are adults who are financially responsible and independent. If you’ve ever struggled with financial problems that were brought on by bad habits — or simply by not knowing how to approach financial management effectively and efficiently — then you know what a negative impact such problems can have on your life generally, and especially on your relationships with the people closest to you. Money stress can even be bad for your health and is a common cause of anxiety and depression. It’s certainly worth our efforts to save our children from such a fate.
The Canadian government felt that financial literacy was critical to Canadian economic growth and prosperity, and they created a task force to study it in 2009. The task force defined financial literacy as having the knowledge, skills, and confidence to make responsible decisions at every life stage. Many people now recognize it as an important life skill.
“A neighbour has a twenty-six-year-old daughter who lives at home with her parents. She only has a part-time job working in retail, she Ubers everywhere rather than take public transit, goes out for brunch every weekend, buys takeout food regularly for dinner, and just came home from a week’s vacation in Mexico. And she doesn’t have any savings at all — no RRSP, no TFSA, not even a basic savings account. The worst part is, she couldn’t care less about learning about finances — she’s more concerned about how many followers she has on Instagram! Her parents now bemoan the fact that they did not take the time to teach their daughter good money management skills and habits when she was younger. They’re distressed by the fact that she doesn’t seem to share any of their values and seems to take so much for granted. It’s really strained their relationship with her.”
The basic challenges parents face are lack of knowledge, lack of time, and lack of opportunity (or not always recognizing when an opportunity presents itself). Teaching your kids how to manage money is particularly hard if you’re not good at it yourself. It becomes easy to just avoid the conversations altogether, especially when you’re running a busy household with so many competing demands on your time. Although it may not feel like a priority when your kids are little, their early years are an important time to lay the foundation and teach the basics. The concepts are the same as they get older, but the stakes get much higher. It’s better if they can learn from their mistakes when the stakes are low.
A lot of parents procrastinate: they don’t teach their kids about money because they think their kids are too young. But there are lots of ways to engage younger children with money. Maybe your kids don’t seem all that interested in learning about money. Your challenge is to make it relevant to them and to use opportunities in your everyday lives as teachable moments. You don’t have to set aside extra time; these opportunities will crop up in day-to-day activities like grocery shopping, planning a birthday party, or going to the mall, as well as when they get their first real job.
What if your kids are already teenagers, but you’ve never taught them about money: is it too late? No — it’s never too late to learn a new skill or to learn how to do things better. The way you approach money management with teens is different. For instance, you can discuss more sophisticated topics with them than with their younger siblings. But the basic concepts are the same throughout your kids’ lives and your own: when you earn money, you have four basic choices about what to do with it: save, spend, share, and invest. You want your kids to understand that making a lot of money doesn’t guarantee financial security; financial security comes from making sound decisions with the money you make.
Financial technology (known as “fintech”) is changing every aspect of how we deal with money and has produced new ways to manage it in a digital and mobile world. Much of what we do with money (whether we are earning, saving, spending, donating, or investing) can increasingly be done using technology, either online or on our phones. Canada (along with the rest of the world) is moving toward a cashless society. In Sweden, where 98 percent of transactions are digital, they have almost eliminated cash. So how do you teach your kids about money in an increasingly cash-free world?
The answer, especially with younger kids, still starts with cold, hard cash. As your kids get older, you can introduce “paying with plastic” (i.e., debit and credit cards) and from there move on to digital money and tools like apps. We will address this issue in more detail in subsequent chapters.
When asked who should be responsible for educating children about responsible money management, most respondents in a study conducted by CPA Canada (CICA Canadian Finance Study 2010) felt that parents or guardians had the most responsibility. Next in line were schools, followed by the financial services industry and then government. We’ll get to the very important role that parents play in the next section, but first a word about financial literacy in school.
Each province is responsible for whether and how financial literacy is taught in school. For example, financial literacy has been integrated into the curriculum in Ontario from Grades 4 to 12 since 2011. This means it’s being taught in many different subjects such as math, social studies, Canadian and world studies, business studies, and others. Students learn about basic money management and how to be an educated consumer, and they gain knowledge that will help them be confident in making decisions about where and how to invest their money.
Other studies1 have shown that 84 percent of parents and 70 percent of high school students want financial learning in the classroom. Beginning in 2019, Ontario’s new career studies curriculum for Grade 10 will take a deeper look at financial management, including budgeting for the first year after graduation and comparing different forms of borrowing to pay for post-secondary education.2
In 2008, the British Columbia Securities Commission (BCSC) and the Financial Consumer Agency of Canada adapted an existing BCSC resource called Planning 10: The City into a national online resource called The City/La Zone. It gives youth the knowledge, skills, and confidence to plan for their post-secondary education or career and to navigate through the financial realities of adulthood.
A 2017 PricewaterhouseCoopers study found that millennials are generally better educated and more skilled than their parents were at the same age, but only 24 percent have basic financial literacy (meaning an understanding of assets, expenses, and income). Just 8 percent have high financial literacy, including a grasp of taxes, mortgages, and investing. In response, some universities in Canada are offering personal finance courses.
For example, the University of Toronto’s Mississauga campus offers an eleven-week introduction to personal finance course. Ninety-five percent of the students come from non-business backgrounds, and enrolment has tripled since it was first launched in 2017. The course covers the foundations of personal finance (from bank accounts to retirement planning) with tips on developing a good credit history, working with financial institutions, and building long-term goals, such as property ownership. The University of Waterloo, the University of Calgary, and the University of Alberta also offer on-campus programs.
L’Université du Québec à Trois-Rivières offers a massive open online course on personal finance. The free five-week online class covers personal finance basics, taxes and tax breaks, and growing your personal wealth.
So, ask your kids what they’re learning in school about money and try to reinforce those lessons at home.
As parents, you try to be good role models for your children. You’re careful about how you treat and relate to others, how you look after your health and well-being, and how you balance work and family life, because you know your kids observe everything. They’re watching and learning from you — and they pick up both your good and bad habits, including habits of financial management. So, what kind of financial role model are you?
• Do you spend money impulsively or are you cautious and deliberate about your spending?
• Do you save up for a big purchase or do you buy what you want when you want it, charge it to your credit card, and worry about it later?
• Do you pay your bills on time and keep organized files or do you throw unopened bills on top of the fridge and ignore them?
Try doing the Role Model Self-Assessment exercise at the end of this chapter; it will give you a good idea of where you stand as a role model. And if you teach your kids well, you’ll find that older siblings can also be important role models for younger kids.
In many households, money is a taboo topic. Some parents would rather talk to their kids about sex than money! Many parents say they avoid talking about money with their kids because they don’t feel qualified to do it properly. They don’t know how to approach it, and they don’t have the information they need. Many also feel they’re not equipped to handle some of the uncomfortable questions that their kids may ask, like “Are we rich?”, “How much money do you make?”, and “How much is our mortgage?” The answers to these questions are private family matters and probably not something you want to share with the whole world, so you have to keep in mind your child’s age and maturity when answering them. Ask your kid questions to make sure you understand what they’re really asking. Often, when kids ask such questions, they’re really just looking for reassurance that everything’s okay. But if they ask, it’s best to find an answer that is honest, one that stresses confidentiality and trust, and one that is only as detailed as you think appropriate. The discussion can often take place by dealing with general concepts rather than getting into specific numbers — concepts such as:
• the meaning of “rich”;
• the importance of income, i.e., not that it should be a certain amount, but that it’s sufficient to provide a stable life;
• how mortgages work; and
• good debt versus bad debt.
While it may be taboo to expose confidential family information, there should be nothing distasteful about teaching your kids general money management skills. Living within your means, budgeting, and saving for important goals should be discussed openly — and they should be discussed often.
One of the goals of teaching your kids about money is to make them aware of the cost of running a household. Not that your kids should feel responsible for making ends meet — that’s your job as a head of the household. But they can at least become aware of the cost of their needs and wants and get a better understanding of how providing for them fits into the bigger picture. Kids, especially teenagers, can seem selfish because they tend to focus only on their own needs and wants. With more information, though, they will come to realize that you have to prioritize and balance all of the family’s costs of living. It helps them put things in the proper perspective.
Raising kids is expensive. According to the website MoneySense, the estimated cost of raising a child in Canada from birth to adulthood (in today’s dollars) is approximately $13,366 a year or just over $250,000 — and these costs are just some of the components of your household budget. For some families, budgeting is a dreaded activity, right up there with dieting! Both words bring up thoughts of deprivation. But if you think of a budget as a spending plan, one that will let you have and do the things in life that are most important to you and that are aligned with your values, it makes an otherwise tedious process meaningful and rewarding.
When creating a spending plan, keep in mind that your expenses fall into two broad categories: overhead expenses and discretionary spending. Most overhead expenses are fixed costs and are governed by a contract. They’re easier to plan for than variable expenses because they usually cost the same amount every month (though some fixed costs, such as annual home insurance premiums, are periodic or occasional). These expenses can’t really be avoided because they’re the basic costs of living. Examples of overhead expenses are:
• rent or mortgage payments;
• property taxes;
• childcare/daycare;
• car payments or other transportation costs; and
• cable, internet, or cell phone bills.
Other overhead expenses like groceries, clothing, utilities, and gas for the car are a bit more variable — the amount you spend may change from month to month — but you can’t eliminate these expenses altogether.
Discretionary expenses are costs incurred at your discretion. You have a lot of flexibility as to whether to incur these costs at all, and, if you do, how much to spend. Examples include:
• restaurant meals and entertainment;
• recreational shopping;
• personal care;
• vacations;
• club dues;
• hobbies; and
• gifts.
So, how do you budget?
The initial step is to pay yourself first by automatically transferring a certain sum of money every month to a designated account. Depending on your goals and objectives, this can be either a regular savings account or a tax-advantaged account like a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA). You get used to living without this money, and what remains after you’ve paid yourself first goes toward covering your overhead expenses. Any funds that remain after you cover all of your overhead expenses are available for discretionary spending or additional savings.
“Don’t save what is left after spending; spend what is left after saving.”3
— WARREN BUFFET
Use the Cash Flow Calculator at the end of this chapter to calculate your household cash flow. Most likely, the biggest cash outflow in your budget is your mortgage payment or rent, followed by car payments, property tax, insurance, and possibly tuition. You can use the Cash Flow Calculator to create a spending plan that’s right for you and your family.
Preparing your budget and your cash flow will give you a clear picture of your financial health. If you’re spending less than you earn, your cash flow will be positive. That positive cash flow is money for savings (or sometimes for further discretionary spending). If, on the other hand, you’re spending more than you make, your cash flow will be negative. Most people deal with negative cash flow by using credit to cover the shortfall. For example, they may use credit cards, department store cards, personal lines of credit, or home equity lines of credit. Using credit occasionally because your household cash flow is uneven (e.g., you’re self-employed or earn commissions) is fine. In those situations, you may run surpluses (excess cash flow) some months and deficits (insufficient cash flow) other months. But if you’re using credit every month to make ends meet, then you’re living beyond your means. You’re also building up debt as those monthly shortfalls begin to accumulate. This situation is obviously not sustainable. In his book, Client-Centred Life Planning,4 Michael R. Curtis introduces the following “Three C” strategies to close a financial gap:
• Create: creating additional income or wealth
• Convert: converting consumption assets into income-producing assets
• Conserve: conserving existing resources
You can use these strategies alone or together. Always look for high-leverage solutions that will have a significant impact on the bottom line. For instance, if you can’t afford your monthly car payments, conserving by cutting back on your daily latte may help a bit, but it probably won’t get you all the way there!
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Create |
Creating wealth brings more cash into the household. For some people, this may mean returning to the paid labour force, creating a side hustle by turning a passion or hobby into a business, or participating in the gig economy by, for example, driving for Uber. Perhaps you could rent out a spare room or the basement apartment in your house. For others, it may mean adjusting their investment portfolio to focus more on generating income to supplement their salary. |
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Convert |
Downsizing to a smaller house is the classic example of the “Convert” strategy and has been a popular tactic as people move into their retirement years. Selling your large family home, buying a less expensive, smaller home, and investing the difference allows you to convert a consumption asset into an income-producing asset. Or leverage the sharing economy by listing your house on Airbnb during periods when you’re travelling or living elsewhere. Converting may also involve the sale of a cottage or other vacation property, a boat, a car, or any other unnecessary assets to generate capital that can be invested to produce income or meet other financial objectives. |
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Conserve |
Creating and converting are long- and medium-term solutions, but conserving has immediate impact. Examine your expenses for ways to defer, cut back, or eliminate excessive or unnecessary spending. Look for discretionary expenses like meals, entertainment, shopping, and vacations that are easy to cut. |
If you take these tips to heart, you can rest assured that you will become exactly the kind of role model your kids need to make them money-smart — both now and throughout their lives.
Values are the things in your life that are most important to you, that you’re willing to take a stand for. Some people value education, achievement, prestige, or wealth. Others value security, family, friendship, or adventure. The way you spend your money and deal with your finances says a lot about your values. Do you know what your top five values are? Do the Values Validator exercise at the end of this chapter and find out.
You may think your kids will pick up your values by osmosis, but these days kids are exposed to a lot of conflicting messages about money, especially from traditional and social media and their friends. So be clear about your family values and how they impact your financial decisions. Get your kids to try the Values Validator and to leave their answers out in the kitchen where everyone can see them. Let the list be a visual reminder to help all of you to stay focused on your values and the things you’re committed to. The values you pass on to your kids will help them prioritize their spending and set meaningful and compelling goals for themselves. The combination of solid values and strong money management skills creates a good foundation for making sound financial and life decisions.
Many people think that if they had more money, they’d be happier. However, studies have shown that while happiness increases as you earn up to $75,000 a year, after that, making more money doesn’t actually make you happier. So, once you have enough money to meet your basic needs, how can you use it to make your lives happier?
1. Shift from buying “stuff” for yourself to investing in experiences. Research shows that people tend to be happy with new things initially, until they realize better things are available. Satisfaction with stuff tends to decrease over time, while satisfaction with experiences like travel, hobbies, or concerts tends to increase with the passage of time.
2. Spend time and money on others. People who give back and help others who are less fortunate often say they get back more than they give.
3. Spend money to save time. Paying someone to do personal or household chores and tasks can free you up to spend time on the people and things that matter most. It can also buy you time to exercise, an activity that results in immediate and long-term benefits for happiness.
“Simon, who just turned six, now gets an allowance and is expected to save some of it, spend some, and share some. He decided he wanted to buy himself a toy, so his mother took him to the dollar store. But before he got to the toy, he passed jars of bubbles, which his baby brother, Arthur, adores. He carefully looked at the price and said he wanted to buy those for Arthur. Then he felt sad because he wouldn’t be able to buy a toy for himself. His mother explained to him that he had in fact saved enough spend money for both! It made him so happy to spend his own money on a gift for his little brother.”
As we’ve indicated, becoming a money-smart family starts with developing healthy financial habits and then modelling them for your kids.
Throughout this guide, we will refer to the Taylor family (Robert, Michelle, and their daughter, Emma) as a great example of how to do things right. They have ten healthy habits for managing their finances — simple, common-sense guidelines that keep their affairs in order and set the stage for any discussions they may want to have with their kid about money. Here they are:
1. Know where you stand financially
The starting point for the Taylors was figuring out their net worth: everything they own less everything they owe. And they keep a close eye on it, making sure it’s moving in the right direction, with assets growing and debt shrinking. Why not take the first step in figuring out where you stand by completing the Net Worth Worksheet at the end of this chapter?
The Taylors also know how much money comes in every month (and every year). They understand that it’s a finite amount, and they treat it with care. Equally important, they understand that managing money is about making choices. Like the rest of us, they have to decide what to do with the money that comes in: how much to save, spend, share, and invest. And they control how much money goes out by monitoring their household cash flow using a template similar to our Cash Flow Calculator at the end of this chapter.
2. Live within your means
Arguably, this is the most important lesson you can teach your kids. And the best way to teach it is to actually live this way, to walk the walk. The Taylors simply don’t spend more than they make. In fact, they make sure they can’t spend more than they make because they always follow the third healthy habit.
3. Save, or pay yourself first
Every month, they take a certain amount of money directly from their paycheques and put it into savings. To make sure it happens, and to make it really easy, they set it up as an automatic transfer. They’re now used to living without this money, and they spend only what remains. They don’t rack up credit card debt or balances on home equity loans or lines of credit because they follow the fourth healthy habit.
4. Understand the difference between good debt and bad debt
The Taylors understand that credit can be a wonderful tool when used responsibly. Credit is convenient — much more convenient than using cash or cheques. Credit can also act as a safety net in case of an emergency (more on that in healthy habit #5). Building a good credit history enables you to make big purchases such as a car or a house at a reasonable interest rate; like many families, the Taylors have a mortgage on their house. Incurring debt for the purpose of buying an asset — something that adds to your net worth and has the potential to go up in value, such as a house or a stock — is an example of good debt. Student loan debt is another example of good debt, as it’s an investment in the student’s future career and earning power.
However, even with good debt, you must never take on more than you can repay within a reasonable period of time. If you have trouble servicing your debt (you pay late or you miss payments), you will damage your credit rating. Bad credit hurts: you may be denied loans or have to pay extremely high interest rates, and you may face higher insurance rates. Some employers even check the credit of prospective employees. They see credit history as an indication of responsibility.
Bad debt, which is something the Taylors actively avoid, is debt incurred to purchase consumption goods such as furniture, appliances, TVs, and clothes. These items have almost no resale value, don’t go up in value (in fact, they lose value the minute you walk out of the store with them), and don’t add to your net worth. Going into debt on your credit card or department store card to buy these types of items is very costly by the time you factor in the interest expense. The Taylors save up for these types of purchases.
5. Set up a financial safety net
The Taylors want their family to be protected in case a financial emergency occurs. A rule of thumb is to have three to six months’ worth of living expenses in cash reserves, because if you become unemployed, that is how long it takes, on average, to find a new job in your field. An emergency fund can also get you through a period when you can’t work due to injury or illness. They opted for the more prudent larger amount. This will enable them to keep up their mortgage payments and buy food if one of them suddenly loses their job or otherwise can’t work. They also have adequate life and disability insurance, as well as automobile and homeowner’s insurance.
6. Know the difference between needs and wants
If you want something badly enough, it can be really easy to convince yourself you need it, especially given the very powerful forces in the media that try to convince us that our “wants” are actually “needs.” Our kids are bombarded at least as much as we are, if not more, when you consider time spent on social media, and they may lack the critical thinking skills that help us deconstruct the advertisers’ methods and messages. We’re not doing our kids (or ourselves) any favours by giving in to their every demand.
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Family Discussion Needs versus Wants |
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Before deciding to make a purchase, ask your kid to answer this question: “Do I really need this, or would it just be nice to have?” You’d be amazed at how much money that simple question can save you! And you might be surprised at your kid’s willingness to give it a try. |
7. Teach delayed gratification and set financial goals
Delaying gratification is another important life skill you can help your kids develop. A famous psychological study (the “marshmallow test”) proved this. It showed the effect of impulse control and willpower on academic, emotional, and social success.
A group of four-year-olds were given marshmallows. They were told that they could have one marshmallow now, but if they could wait several minutes, they could have two. Some children grabbed a marshmallow and ate it. Others waited, some covering their eyes to avoid seeing the tempting treat. One child even licked the table around the marshmallow!
Over fourteen years, the researchers followed the group and found that the “grabbers” suffered low self-esteem and were perceived by others as prone to envy and easily frustrated. The “waiters” coped better and were more socially competent, self-assertive, trustworthy, dependable, and academically successful. The lesson: strong willpower and impulse control will help us stay on task and meet our goals throughout our lives, whether it’s studying instead of watching TV or saving for retirement instead of spending.
Setting financial goals is one thing you can do that helps teach delayed gratification. And setting goals can be easy.
Just writing them down and being able to see a list or a collage takes away some of the urgency around buying. Waiting for a reward by setting goals in this way — and delaying gratification — also helps to counter any attitude of entitlement your kids may have picked up. Many parents also find they can delay gratification on big-ticket items by connecting them to a special occasion like a birthday, holiday, or other special occasion like graduation.
Sometimes, kids just need reminding that shiny new things lose their lustre pretty quickly. When Emma Taylor was young and was pestering her parents for something she just “had to have,” Michelle used to ask her: “Remember the last thing you had to have? What was that again? And do you have any idea where it is?” It was usually somewhere in the corner of their basement playroom gathering dust!
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Things to Do Wish List |
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Create a wish list of wants with your kids. It can take many forms: • Make a simple, written list • Create a “vision board” or collage of images of things your kids want |
8. Track your spending
There are many different ways to find out where your money is really going. It doesn’t matter how you track your spending; the important thing is that you bring awareness to your spending habits. It’s a great reality check. You may be shocked to learn that your actual spending bears very little resemblance to how you think you spend your money. You may also find that tracking and reviewing your spending is a powerful motivator to make better spending choices.
If tracking all of your spending seems overwhelming, there is a shortcut you can take: focus on your problem areas. We all have them — those little indulgences that are more want than need. It could be your daily latte habit or a weakness for the latest electronic devices. Begin by just monitoring those. Being more mindful of your spending may lead to more informed — and more satisfying — spending choices going forward.
These days, all of the big banks have tracking and budgeting tools built into their mobile banking apps. The app automatically downloads and categorizes your spending, compares your spending to your monthly average, and lets you set up budgets. You can also set up real-time alerts every time there’s a transaction, as well as notifications that summarize your daily spending. Research has shown that these technological “nudges” lead to a decline in spending.
The Taylors also take the extra step of comparing their actual spending to their budget to see if they’re on track. Because a budget is a work in progress, the Taylors use what they learn to tweak their budget on a regular basis and make it more realistic.
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Things to Do Tracking Spending |
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Which of the following would work best for you? • Keep a written spending journal • Use a spreadsheet • Use a smartphone app or computer software that automatically downloads your banking data • Use the spending tracker built into your mobile banking app |
9. Save now for your children’s education
The Taylors have done this right. They take full advantage of tax-assisted programs offered by the government to help save for their kid’s post-secondary education. The government created the Registered Education Savings Plan (RESP) for this purpose. Although the amounts you put into an RESP are not tax-deductible — that is, you must first pay any tax due on the money you contribute — you don’t pay tax on any gains or investment income you earn while the funds remain in the plan.
The other major benefit of saving money in an RESP is that the government will also contribute funds into the plan; their contribution is called a Canada Education Savings Grant. The amount of the grant is 20 percent of contributions to a maximum of $500 per child per year, with a lifetime limit of $7,200. See Further Resources at the end of the book for more resources related to RESPs.
Earnings accumulated in the RESP, as well as government grants, must be used to pay for the cost of post-secondary education. These amounts are taxable income to the student in the year paid out (they can use the tuition tax credit, plus other tax credits, to offset tax they’d otherwise owe). The original contributions can be paid out to the student or parent tax-free.
10. Present a united money front
It complicates matters when parents don’t agree on important issues. This is especially true when it comes to money, which is why disagreement over money issues is one of the leading causes of divorce. But it’s really important for parents to present a united money front. If your kids sense an opportunity to get what they want by exploiting the fact that their parents are not on the same page, they will take full advantage. As we’ve seen, values influence your financial behaviour, and it’s best if you and your partner can arrive at shared values. In addition to showing your kids that it’s possible to discuss and come to agreement about money, it also makes it much easier to set financial goals for your family.
Managing finances responsibly can seem like a daunting task. Maybe you’re already doing it well. If so, congratulations! If not, though, I hope some of the information and resources in this chapter will help you get your own financial matters in order. And the following chapters should help you talk about money management with your kids in a way that they can relate to at different stages of their young lives.
Key Points
• As a parent, you’re a role model for your kids — probably their most important role model. This is just as true in money matters as in other important aspects of life. The best way to raise money-smart kids is to be smart about money yourself and to talk to them about how money works.
• Kids who learn lessons about money management from a young age have a better chance of becoming healthy, happy, and successful adults who are financially responsible and independent.
• Ten Healthy Habits of Financial Management:
— Know where you stand financially
— Live within your means
— Save, or pay yourself first
— Understand the difference between good debt and bad debt
— Set up a financial safety net
— Know the difference between needs and wants
— Teach delayed gratification and set financial goals
— Track your spending
— Save now for your children’s education
— Present a united money front
This worksheet can be downloaded at cpacanada.ca/flworksheets
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Answer these statements with either True or False |
True or False |
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I wouldn’t stretch myself financially in order to drive a nice car. |
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I try to stay up-to-date on the tax issues that affect me. |
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I like to discuss investments. |
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If I won the lottery, I wouldn’t noticeably change my lifestyle. |
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I’m usually eager to get to work. |
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Learning is an important key to financial success. |
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I’m reasonably careful with money. |
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I adhere to a structured budget. |
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I always conduct due diligence on my investments. |
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When I get advice, I seek a second opinion. |
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I keep well informed for everyday financial decisions. |
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I know where I’m going and how to get there. |
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If there is something I want but don’t need, I walk away and sleep on it. |
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I pay off my credit card balance every month. |
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I reflect on my past investment decisions to see what I can learn. |
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I don’t gamble with my savings by taking excess risks. |
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I try to shop carefully, using coupons and waiting for sales. |
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I can afford everything I need. |
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Fewer than 10 Trues: You have some work to do! |
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10–15 Trues: You’re modelling good behaviour some of the time. Keep working on it |
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15–18 Trues: Congratulations, you’re modelling good behaviour almost all the time! |
Use this tool to help give you a clear picture of your cash flow. This worksheet can be downloaded at cpacanada.ca/flworksheets
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Salary after taxes (take-home pay, self-employment/business income) |
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Total Income |
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Monthly Expenses — Fixed |
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Housing costs (e.g., mortgage, rent, condo/maintenance fees, property taxes, etc.) |
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Utilities — heat, hydro, water |
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Services — phone, cable/satellite, internet, security system |
$ |
|
Insurance — auto, home, life, disability |
$ |
|
Child care |
$ |
|
Existing loans and credit cards (minimum monthly payments) |
$ |
|
Other fixed expenses (e.g., child support, alimony, etc.) |
$ |
|
Total Expenses — Fixed |
$ |
|
Monthly Expenses — Variable |
Dollar Amount |
|
Groceries |
$ |
|
Household maintenance (e.g., renovations, landscaping and gardening, housecleaning, snow removal, lawn care, etc.) |
$ |
|
Transportation (e.g., car lease, gas, transit, car service and repairs, parking fees, licence and registration, etc.) |
$ |
|
Uninsured health services (e.g., prescriptions, dental care, eye care, counselling, any other health services not covered under a plan) |
$ |
|
Education (e.g., tuition, books, exam fees, etc.) |
$ |
|
Long-term savings (e.g., monthly pension plan, RSP, education saving contribution) |
$ |
|
Other variable expenses |
$ |
|
Total Expenses — Variable |
$ |
|
Monthly Expenses — Discretionary |
Dollar Amount |
|
Personal (e.g., clothing, shoes, gifts, salon, gym membership, etc.) |
$ |
|
Daily living (e.g., pet expenses, dry cleaning, etc.) |
$ |
|
Entertainment (e.g., dining out, movies, music, theatre/concerts, etc.) |
$ |
|
Donations |
$ |
|
Vacation |
$ |
|
Other discretionary expenses |
$ |
|
Total Expenses — Discretionary |
$ |
|
Monthly Cash Flow |
Dollar Amount |
|
Total Income |
$ |
|
Total Expenses (Fixed, Variable and Discretionary) |
$ |
|
Net Cash Flow (Total Income — Total Expenses) |
$ |
Use this handy financial worksheet for a snapshot of what you own (your assets) and what you owe (your liabilities). This worksheet can be downloaded at cpacanada.ca/flworksheets
|
Assets and Liabilities |
Dollar Amount |
|
Assets (What You Own) |
|
|
Non-registered assets |
|
|
Chequing/savings account(s) |
$ |
|
GICs/term deposits |
$ |
|
Canada Savings Bonds |
$ |
|
Investment properties |
$ |
|
Cash value of life insurance |
$ |
|
Home(s) |
$ |
|
Automobile(s) |
$ |
|
Boat(s) |
$ |
|
Registered assets |
|
|
RRSPs, TFSAs, RESPs, DPSPs, RRIFs |
$ |
|
Locked-in RRSPs, LIRAs, LIFs, LRIFs |
$ |
|
Value of pension plan(s) |
$ |
|
Other (e.g., annuities) |
$ |
|
Liabilities (What You Owe) |
|
|
Mortgage(s)5 |
$ |
|
Income/property taxes owing |
$ |
|
Car loan/lease6 |
$ |
|
Credit card balance(s) |
$ |
|
Personal line of credit |
$ |
|
Other loans |
$ |
|
Other debts |
$ |
|
Unpaid bills |
$ |
|
Other Obligations?7 |
$ |
|
$ |
NOTE: Record the value of all assets and liabilities, putting a realistic market value on tangible assets such as property, car(s), etc.
This worksheet can be downloaded at cpacanada.ca/flworksheets
|
Assets and Liabilities |
Dollar Amount |
|
Total Assets |
$ |
|
Total Liabilities |
$ |
|
Net Worth |
$ |
This worksheet can be downloaded at cpacanada.ca/flworksheets
Use this method of ranking:
|
Degree of Importance |
Rating (Out of 10) |
|
Not Important |
0 |
|
Somewhat Important |
1–3 |
|
Quite Important |
4–7 |
|
Very Important |
8–10 |
|
Value |
Description |
Rating (Out of 10) |
|
Academics |
I have a high regard for scholastic pursuits |
|
|
Achievement |
It’s important to accomplish my goals |
|
|
Activity |
I like to be fully occupied at all times |
|
|
Advancement |
I want the opportunity for career advancement |
|
|
Adventure |
I like to do things in new and interesting ways |
|
|
Enjoyment |
I want to enjoy life and have fun |
|
|
Expertise |
I want to be a known authority in my field |
|
|
Family |
I want to contribute to family members |
|
|
Friendship |
I want close companionship |
|
|
Health |
I want to be healthy and pursue a healthy lifestyle |
|
|
Independence |
I like to be able to work or be alone and free from constraints |
|
|
Location |
I want to be able to live anywhere |
|
|
Power |
I want to have influence over my future |
|
|
Prestige |
I like to obtain recognition and status |
|
|
Routine |
I like to have a set daily schedule |
|
|
Security |
I like to minimize adverse changes in my life |
|
|
Self- Development |
I want to be the best that I can be |
|
|
Self- Realization |
I like to realize the full potential of my skills and abilities |
|
|
Social Service |
I want to serve others |
|
|
Wealth |
I want to be able to afford opportunities |
|
|
Rank Your Top Five Values |
||