How to Teach Your Children About Finance?

The ability to save, invest and make informed financial decisions will have a profound impact on your children's quality of life as adults. Yet, according to a survey by Investment Executive, nearly two thirds (64%) of Canadians report having received no financial education in school. If the school system falls short in this area, the home is where it all begins.

And you don't need to be a financial expert to lay solid foundations. All it takes is starting the conversation early, keeping it simple, and revisiting the topic regularly. Financial literacy begins at home, long before the first investments are made. Let's walk through it together, step by step.

At what age should we start talking about money with our children?

There is no set age at which financial conversations should begin. What matters most is adapting the message to your child's level of understanding and revisiting the topic regularly. Financial concepts can be introduced from a very young age. It's all about using the right approach and examples.

✦ Ages 4–5: Understanding that money is earned

By age five, children already understand the concept of exchange: getting something in return for something else. This is the ideal time to demystify money and prevent it from becoming a taboo subject. But how can you introduce the concept in a practical way?

• Let your child handle coins and count change at the corner store.

• Play with a toy cash register or set up a pretend store.

• Explain in simple terms: "Mom and Dad go to work to earn money, and that money helps us buy the things we need."

Teaching children that something expensive is not necessarily valuable, and vice versa, is a lesson that will serve them throughout their lives. In investing, the value of an asset is measured by the long-term benefits and returns it generates, not by its purchase price. Applied to everyday spending decisions, this distinction can help children recognize the difference between an impulse purchase and a thoughtful investment.

✦ Ages 8–12: Connecting money to effort

This is when children begin to understand the relationship between work and financial reward. Here are a few simple habits to encourage:

• Introduce an allowance tied to real responsibilities (taking out the trash, shovelling snow, etc.).

• Give them a small budget for a specific purchase — clothing, for example. The goal isn't for their decisions to be perfect; it's for them to learn.

Encourage them to make trade-offs: would they rather buy two expensive items or five more affordable ones? Simple choices like these teach prioritization.

Ages 16–18: The first real financial decisions

First job, first bank account, first tax return. Your teenager is ready to move from learning about money to managing it. This is the ideal time to introduce systematic saving, registered accounts, long-term investing and the basics of taxation. They should understand that these lessons are designed to provide the building blocks for a strong financial future.

What is the first practical step a parent can take to help their child develop saving habits?

One of the best ways to introduce a child to saving is to guide them towards making rational decisions on their own. Take a scooter, for example. Instead of buying it for them right away, encourage them to save $10 a week toward the purchase. After 30 weeks, they'll have enough to buy it themselves.

Along the way, they'll learn valuable lessons about patience, planning and making thoughtful spending decisions. They may even decide they no longer want the scooter by the time they've saved enough money, which is part of the lesson. We call it deferred gratification: the ability to resist an immediate reward in favour of a greater, more lasting benefit.

"An allowance handed out with no expectations attached has limited educational value. Tying money to age-appropriate responsibilities, such as taking out the garbage, shovelling the driveway or helping a neighbour, helps children understand the connection between effort and earnings."

How can you help your child understand the power of compound returns?

Compound returns are the single most important concept in investing. And they can be explained simply, even to a ten-year-old. Here is a table illustrating the principle:

Money can work for you, and the concept is easy to understand. Like a snowball rolling downhill, your savings can grow larger over time as your returns begin generating returns of their own. Without adding another dollar, your capital can more than double. That's the power of time and compound returns working together.

The Rule of 72: a simple tool for financial education

The Rule of 72 is a formula that approximates the number of years required to double your savings. Just divide 72 by the annual rate of return to calculate the approximate number of years required.

• At a 6% annual return → 72 ÷ 6 = 12 years to double capital

• At a 9% annual return → 72 ÷ 9 = 8 years to double capital

At what age can a child start investing?

✦Ages 14–16: First steps with guidance

With the help of a parent, a teenager can begin investing through an in-trust account or a jointly managed RESP. By this stage, they may already have savings from part-time jobs or birthday gifts. The important thing is that they learn not to spend everything — a habit that stems precisely from the financial education introduced at an early age.

✦At 18: Legal autonomy

Once they reach the age of majority, young adults can open their own investment accounts, including a TFSA, RRSP, FHSA (for a first home purchase) and even a personal brokerage account.

✦A $275,000 cup of coffee!

This is an example we often share with parents and their teenagers. Suppose a teenager were to skip buying two coffees per week at Starbucks — about eight per month — and invests the $50 monthly savings. Here’s what that could look like:

• Monthly savings: $50 (about two coffees per week)

• Duration: 50 years (ages 15 to 65)

• Average annual return: 7%

Result:

• Amount invested out of pocket: $30,000 (the cost of 50 years of coffee)

• Final portfolio value: ≈ $275,000

• Compound market returns generated: ≈ $245,000

Nearly 90% of the final value comes from investment growth. Two coffees a week may seem insignificant. A quarter of a million dollars by retirement certainly isn't.

"Time makes all the difference. It is the only asset you can never buy back."

Is the RESP a good tool for teaching children about finance?

The RESP (Registered Education Savings Plan) is a tax-sheltered account. It can be viewed as an extension of a parent's investment portfolio that comes with significant tax advantages.

→ The immediate benefit: On the first $2,500 contributed annually per child, governments provide up $750 in combined grants:

• Federal (CESG): 20% of contributions, up to $500 per year (lifetime maximum of $7,200 per child)

• Quebec (QESI): 10% of contributions, up to $250 per year (lifetime maximum of $3,600 per child)

The result? An immediate 30% return on your contribution before the money is even invested. Few investments offer such an advantage from the outset.

→ The long-term benefit: Investment returns earned within an RESP grow tax-sheltered. When funds are withdrawn during a child's post-secondary studies, the grants and investment income are generally taxed in the student's hands, often at a very low rate, because students typically have little or no income.

Using the RESP as a teaching tool

Beyond its tax advantages, an RESP is a valuable way to involve your child in their own financial planning:

• As your child grows, explain why the account exists and what it is intended to fund.

• Make it a family project: "This is what we've been setting aside for you since you were born. Let's look together at the goal we set and how we've invested to help reach it."

• Share account statements in an age-appropriate way: at age 10, you might show the total balance; by age 15, you can explain the difference between contributions, government grants and investment returns.

Your child will gain a better understanding of how their parents planned and funded a long-term goal, such as their education. Later in life, they can apply the same approach to their own financial goals and, eventually, to those of their own children.

What mistakes do parents make when talking to their children about money?

Mistake #1: Not talking about money at all

This is by far the most common mistake. In Quebec, money remains a taboo subject for many families. We openly discuss health, relationships and careers, yet personal finances are often left out of the conversation. As a result, young people who are not exposed to concepts such as saving, borrowing and investing at home may enter adulthood without the tools they need to make informed financial decisions.

Mistake #2: Saying "We can't afford it" without explaining why

There is a fundamental difference between saying:

❌ "We can't afford a boat."

and

✅ "A boat costs $40,000. We'd probably use it only a dozen hours a year, and that doesn't include fuel, insurance and winter storage costs of about $10,000 a year." Explaining why that choice doesn't make sense.

This approach demonstrates what a thoughtful financial decision looks like, rather than framing it as a lack of means. Children learn that their parents aren't simply lacking money, they're making deliberate choices about how to use it.

Mistake #3: Confusing price with value

Teaching children that something expensive is not necessarily valuable, and vice versa, is a lesson that will serve them throughout their lives. In investing, the value of an asset is measured by the long-term benefits and returns it generates, not by its purchase price. Applied to everyday spending decisions, this distinction can help children recognize the difference between an impulse purchase and a thoughtful investment.

What role does parental example play in financial education?

Leading by example (not theory) is the most powerful tool at your disposal. It's not about showing your children your account statements. It's about passing on healthy habits, a shared understanding of money and the right financial instincts. Families where money and investing are discussed as naturally as hockey tend to raise children who are comfortable with the subject.

Share your know-how with your children by walking them through:

• How you made a particular financial decision;

• Why you saved before buying;

• How you evaluate a major purchase;

• What you learned from your own financial mistakes.

Children don't learn only from what they're told. They learn primarily from what they observe. If you budget, compare options before buying and talk about investing with confidence rather than anxiety, your children will naturally adopt those behaviours. In time, they'll see you as a trusted source of guidance when making their own financial decisions.

"Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime." — Lao Tzu

How can a portfolio manager help families plan across generations?

At Allard, Allard & Associés, our role goes beyond portfolio management. It also involves helping families pass on their values, knowledge and wealth from one generation to the next. In response to client needs, Allard, Allard & Associés has introduced financial education sessions for young adults. It's a simple initiative that helps normalize conversations about money within the family while giving young people a chance to ask questions in a supportive and professional environment.

These sessions can help:

• Guide parents in structuring their financial legacy;

• Educate the next generation on the principles of long-term investing;

• Facilitate family conversations about money, which are often difficult to navigate;

• Help ensure that wealth built over decades is preserved and continues to grow.

Financial literacy is passed on around the dinner table, through everyday decisions and through the conversations we have — or don't dare to have. True wealth lies in the knowledge and habits we pass on, not only in the assets we leave behind. Starting early gives children the most powerful advantage of all: time. And unlike money, time can never be earned back.

Would you like to incorporate intergenerational planning into your financial strategy? Book a meeting with one of our experts for a complimentary consultation.