The Advantaged Investor - Teaching Kids about Money (Ep 96)
Robin Taub, CPA &CA, keynote speaker and bestselling author joins the podcast to discuss kids and money, including:
- Importance of financial literacy
- Lack of financial planning education for kids/youth
- How to start helping your kids/grandchildren
- Important things teenagers/young adults can do
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Transcript
Chris Cooksey: Hello, and welcome to the Advantaged Investor, a Raymond James Ltd. podcast that provides perspective for Canadian investors who want to remain knowledgeable, informed, and focused on long term success. We are recording this on May 23, 2024. I'm Chris Cooksey from the Raymond James Corporate Communications and Marketing Department, and today, Robin Taub, who is a chartered professional accountant, a keynote speaker, and a bestselling author is joining us. Her latest award-winning book, The Wisest Investment: Teaching Your Kids to Be Responsible, Independent and Money-Smart for Life, gives parents the information, strategies, and inspiration they need to teach their kids about money.
Welcome to the Advantage Investor, Robin. I really appreciate you taking the time to talk with me today. It's a beautiful sunny day in Toronto. I hope you're doing well.
Robin Taub: Yeah, thanks for having me, Chris. Looking forward to our talk.
Chris Cooksey: Awesome. Now, as we both know, financial literacy in general, and probably education on personal finances generally, is It's not existent in the country, at least in a formal setting, obviously there are individuals like yourself and maybe some companies that do some things, but in general it seems to be something that the education system lacks. I would, I would suggest –
Robin Taub: Can I, can I push back a little bit on that?
Chris Cooksey: Sure, absolutely.
Robin Taub: In Canada, financial literacy is being taught across the country in every province and territory. It's going to be different depending on where you live because education is a provincial responsibility or territorial thing, but in Ontario, for example, where I live, financial literacy is being taught in school for the last at least 10 years, it's been integrated into the curriculum and there are also a lot more standalone classes now. For example, in grade 10 careers, they have a module on financial literacy. In British Columbia, for example, they've had a course called planning 10 that's been around for a really long time. We created a map that shows all the different teachings that are going on in Canada, and as I said, some are mandatory, some are elective and we posted out on LinkedIn in November 2023, which was financial literacy month, so I think a lot of people think like you do, that it isn't being taught formally, which means maybe it's not being taught effectively, and that's where parents come in, but it is happening in school.
Chris Cooksey: I have three kids, two who are recently graduated and one who is going to be graduating this year. And I mean, unless it happened sort of on the down low, and now COVID probably took -- I mean, I don't know if that education was that serious during COVID. But the so, it's good to hear that it's actually moving forward, because I know when I was growing up it did not exist and it wasn't really taught at all. So, but that is, this is such an important thing on how someone quote/unquote “turns out”, if you will having that, I would suggest that we probably learn our money habits from our parents. A lot of times that can be a very positive thing, but it also could probably be a very negative thing. Wouldn't you agree?
Robin Taub: Well, for sure. And one of my strategies for parents that are trying, and want, to teach their kids is to try to get their own financial house in order first so that they can lead by example and be good financial role models for their kids. Whether you're aware of it or not, you are a role model for your kids, including with money. So they are picking up the things that you do and say and your habits. It's really worth the effort to try and model them because habits are sticky. They create these neural pathways that are difficult to change. You want to try, you want your kids to try and establish good habits early in life.
Chris Cooksey: Totally makes sense. I've told my kids that if they become productive members of society with a good financial background or some ideas on how to balance their cheque book - to talk old school, or pay off their credit cards or whatever, that one of my big jobs, I was successful at. I'm glad to hear that we're moving forward in that way.
Robin Taub: Those are two good examples. Maybe, like you said, not using a cheque book anymore, but just like knowing where you stand, being aware of how much money you have, like what you own, what you owe, your cashflow and your net worth, and then, like you said good habits, like paying your credit card balance off monthly, not the minimum payment, but ideally the full amount and using credit responsibly.
Chris Cooksey: Yeah, and like we said, it's just so important for their future. We do have a lot to get into, if you're ready, let's we'll jump into the more formal aspect of this. And why don't we start with who is Robin and your background and why you got into this sort of side of financial planning, if you will.
Robin Taub: Right. So I'm actually not a financial planner, a CFP, but I am a charter professional accountant, as you mentioned in the introduction. My background is that when I graduated from university, I went and worked at one of the big 4 accounting firms, KPMG. I spent a couple of years there. My clients were mostly financial institutions and then I transitioned to a mid-sized firm that ended up merging with Ernst Young, and I specialized in tax when I was there. I ended up leaving there to go work for one of their clients who was doing real estate syndication. From there I ended up leaving accounting and working at Citibank Canada in derivatives marketing.
So, I've had a broad range of experience in the worlds of accounting and finance, and always had an interest in personal finance. The way financial literacy came to be my focus was, I was volunteering on a committee for CPA Canada, which is the governing body, and it was to do with women's leadership, but at the time, it was around 2008, right after the global financial crisis, and they had done some research that showed that parents are really struggling with teaching their kids about money. The research found that 78 percent of parents had tried to teach their kids, but 2/3 didn't feel they'd been particularly successful, and more than half didn't know what information they needed. So, they approached me because they knew I had kids and they knew I had some media experience, so they approached me and asked if I was. I was interested in writing this book to help parents teach their kids about money. So that's really the genesis of it. And really from there, I just started focusing on creating financial content.
The book, speaking, but I also have worked with a lot of financial services companies over the years, creating financial content for them to use in their content marketing initiatives, as well as just campaigns and collaborations.
Chris Cooksey: Great. So sort of a passion of yours then, I guess would be a way to put it.
Robin Taub: Yeah. I mean, it's something I've always been interested in myself. I think it's an outcrop of having a financial background, applying it to your personal life as well. And something that I always felt my kids needed as they were growing up, I knew that this was an essential life skill to be able to manage money because you're going to be doing that for the rest of your life, and you want to be able to make responsible financial decisions at every stage.
Chris Cooksey: Right. I was just going to bring up, if someone asks you, Robin, why is financial literacy important? You just sort of answered some of that there, it is a life skill that is necessary in order to make your way through life, whether that's getting a mortgage, a car loan or, you know, just buying your groceries.
Robin Taub: I obviously like to say that it's the wisest investment you can make is to teach your kids about money. And the reason it's so important is both from the children's perspective, as well as the parents. From the kid's perspective, it's a basic life skill. You're going to need it. Financial literacy means having the knowledge, skills and confidence to make responsible financial decisions throughout your life. Everyone needs that. The second reason is financial stress, money worries are the greatest source of stress for Canadians and Americans for the sixth year in a row. That's more than health or work or relationships. And money stress can lead to physical issues like high blood pressure and heart disease, as well as other ailments like autoimmune issues, migraines, and obviously mental health issues like stress and anxiety. We want our kids to not have to go through that if they have some financial skills, we want them to not have money worries if possible. And then the other thing we touched on too was we just don't want our kids to develop bad habits, like living beyond their means, that become difficult to break as they get older. So those are from the kid’s perspective.
As parents, I think the research shows that most Canadians can't afford to support their adult children financially and if they do, then some are willing to do so, even if it could jeopardize their own financial future. And then at the other end of the spectrum, if a family has a lot of means and wealth, sometimes they don't want to. They want to still ensure that their kids have these skills because they don't want to encourage dependency with the money that they have. They want their kids to know how to be good stewards of wealth, to be responsible, to be financially mature and have these skills. to manage the money that they may inherit one day.
Chris Cooksey: That's interesting, I mean it's easy to think about you don't want to go bankrupt so learn about money, but the physical and sort of health-related things is probably something that doesn't get enough attention. Not to mention, I bet you there's more than one couple that ended up going their separate ways due to financial reasons.
Robin Taub: Yes, getting on the same page is also really important. As you said, for harmony in the relationship, and also in terms of presenting a united front for your children.
Chris Cooksey: Yeah, that makes sense. Lack of financial planning education, as we talked off the start, I'm glad to hear the education system is finally moving forward. Even when I was in high school, and I wasn't a big school guy, I often thought that a course on this would be very beneficial. You get to university if you go to post secondary and there's all sorts of credit card companies only happy to provide you with a credit card, go to the bar, have some fun. And then of course, they don't really teach you about paying it off, you do that a couple of times and buy a few rounds if you will and maybe this is not the way it is anymore because I'm speaking on my own education.
Robin Taub: Oh, it is. They still, I mean, you said your kids are graduating high school, so they haven't gone. If you take them to university, maybe for a tour or when they go, you'll be amazed that those credit card companies are still out there, and they have ambassadors too, and their goal is to get you to sign up, and you use a credit card, and as you say, a lot of teenagers, if you haven't taught them, or they haven't learned themselves, they're very naïve, and it just seems like such a free money, like, ooh, I'm so sophisticated. I have this card and I can use it to pay for things. But you're just borrowing money in the short term with a credit card. You do have that grace period if you pay it in full on the payment date, no interest, but you are borrowing money. If you don't do that, then interest is going to kick in and a lot of teenagers or even young adults are naive to this fact. So yes, that is like a great example, and credit card debt is something that can get out of hand quite easily.
Chris Cooksey: Absolutely. Now, how do you start with this? Is this like, you have a three-year-old, you get three grapes and I want two grapes and that’s your tax. You don't do that sort of thing I wouldn't imagine. How do you get started?
Robin Taub: I've heard people say that they use Halloween candy to teach their kids about taxes. I have had many people tell me that they have really young kids like under five who are interested in money. Normally, I suggest to parents, and my book kind of starts at age five, so for young kids five to eight, some kids will express curiosity about money or an interest earlier. And that's fine. That's your cue that they're ready to learn. But for most, let's say it's around age five to eight, and that's around the time where they start to get interested, go to preschool, they're around other kids, they see what other kids have and do, and they may start asking questions. They are also with you, and you're always using money in some form, often digital. So that's really the ideal time to start, because you want to start when your kids are young and build on those lessons as they get older. They can make mistakes when the stakes are low and learn from those mistakes if you start teaching them when they're young, like with your credit card example, if you wait until they're that age and they don't know anything about money. They could get into a bit of trouble.
Chris Cooksey: Yeah, that makes sense. The Halloween candy is an interesting way to do it. We just, in our house, used to just take it when they were asleep, and they didn't even realize they were budgeting. Now, so five to eight, you're getting into the basic concepts, I imagine. So how do you start transitioning into more complicated situations as they age?
Robin Taub: The way the framework that I've created that I think is really helpful for parents to make this feel less overwhelming is that there are five essential topics, which I call the five pillars of money. Those are earn, save, spend, share, and invest. So first you have to earn money and then you can choose how you want to save it, spend it, share it, and invest it. Those five topics never change. They're foundational but the specific examples or family discussions or the learning under each of those five does change as your kids get older and more sophisticated. You always want to share age-appropriate information with your children. What you would teach a 5-year-old about saving is going to be really different than what you would teach a 17-year-old and the same for every one of those five pillars. So that's how you do it. You really build on what came before and make sure the information that you're sharing is age appropriate.
Chris Cooksey: Right. And I’d guess it's important, it's a wide-ranging discussion because one thing I've talked to my kids about is you make money, spend some money - you've earned it, you should reward yourself, but know, if you're making $500 a month don't go on a trip that month because you're going to blow through that. So, you know, that accurate way to, to balance the saving and the future versus, you know, living in the now.
Robin Taub: Yeah. You want them to start to think that way as soon as they start earning money. That could mean a job for a teenager, but even if you're giving your children allowance if they're younger and they're not really able to work yet, you still want them to go through that thought process about, I need to save some because I have a goal. I want to spend some because there's always things that your kids needs and wants, and then you want to encourage them to share some to help others and to put some away for the long term to invest it. I agree the earlier they can experience that, the more meaningful it will be, and especially if they are working or you're giving them an allowance that they have ownership over, they're going to think longer and harder about these decisions, and they're going to experience the fact that money's a finite resource and that you have to make choices and live with the consequences.
Chris Cooksey: Now if you are living in, in close proximity to other family, or I guess you don't even really need to live close anymore, can the whole family get involved? Grandparents? Parents? Is that a good strategy as well?
Robin Taub: Yes, they do often, even if they don't live close, it's so common to receive birthday money from a grandparent or money for holidays. If the grandparents are involved in the children's lives and they do live close, then they can play a really important role. I think the “what” can get a little bit tricky is just making sure the grandparents and the parents are on the same page, because often the grandparents, they've done all the hard work of raising their own kids, now they have grandchildren. They want to enjoy them. They want to spoil them. And that can undermine the lessons that the parents are trying to teach their own children. And you want to make sure that you're communicating with your own parents, the grandparents, about what you're trying to do and so that they don't kind of undermine some of those things.
Chris Cooksey: That makes sense. Now I would imagine it's important when they're younger, but when they get to be in that teenage, moving to young adult stage, it probably gets more important as it goes on. You talked about the five pillars and maybe it is five – I was going to ask, what are the three most important things a teenager or young adult can do. What advice would you provide there?
Robin Taub: I agree that the teenage stage, I feel like that's when that's a really crucial stage because they have to decide what they're doing. Are they going to go on to university or college or trade vocation? Are they going to start working? And then they're really going to be making some harder decisions about investing in their education or working and maybe moving out and having to manage a household budget. I believe really there are these five pillars - you do hear sometimes three, which is basically just like earning, saving and spending, but I don't think you can really forget about sharing and investing. I think at that stage, preparing to go to university or college is a really big part of your financial education and financial management. And that hopefully starts early, because maybe as parents you've invested money in an RESP that you're going to withdraw. You also have to figure out how are you paying for that? Some of it might come from that RESP. Is your child going to work during university or college? What skin do they have in the game? Because I think that's a really important thing that they do have responsibility for some of their school budget. Maybe all of it in some cases. You really need to sit down and have that money talk. That's a really important phase and stage to talk to your kids about a budget. And again, hopefully as teenagers, they had a simple budget that they were using, but it becomes more important when, especially, if they're going out of town and they have to manage a household for the first time.
Chris Cooksey: Yeah, that makes sense. Now, my eldest is going the trade route and he started getting his paycheck. And he said to me one day, I can't believe how much money goes to my expenses, including taxes and that sort of thing. And I was like, well, welcome to life, that's the way it goes.
Robin Taub: The paycheque shock.
Chris Cooksey: Yes. First paycheck shock. How do you have that conversation just to prepare them? Because I think everybody, the first time they get a paycheck is like, who the heck is CPP and why are they taking my money?
Robin Taub: I know. Well, that's a great example of a teachable moment, which is another strategy I encourage parents to take advantage of, which is use these opportunities from your day-to-day life to teach your children a money lesson. So, if your child was working as a teenager, then they may have received a paycheque or maybe it's now when they're pursuing their career. You want to sit down and show them, now they may not get a physical cheque, the pay stub anymore like we did a long time ago, it might all be digital, but still there's going to be a breakdown. You do have to explain that income tax is withheld at source, that's the technical term. Meaning it is taken directly off your gross pay and sent to the Canada Revenue Agency so that when you file your tax return you have already paid tax. They're not going to wait around for the end of the year. They want their tax up front, so that's what that is. Then as you mentioned, there's not just income tax. There's also deductions for the Canada Pension Plan, CPP and Employment Insurance, EI. You want to explain what those things are as well. And in the book, I do get into a simple explanation for what those things are, so your kids understand what they're paying into. Depending where they work, they may also have the opportunity to save in a group RRSP. The company may even match that, so you want to look at that as well and see if there's opportunities for them to really boost their savings by taking advantage of that kind of matching program, but yes, it's such an important teachable moment, the paycheque.
Chris Cooksey: Now you mentioned digital a couple of times, and I'm of an age where digital is new compared to how I grew up and so, have things changed with digital or is it just, the same but different.
Robin Taub: It's changed definitely. When I first wrote this book about 13 Years ago, it was pre-digital times and when I updated it, it was in the post digital, post pandemic time. So things have really changed a lot and the pandemic really accelerated the use of digital, if you recall, no one touched money, physical money. I still encourage parents with young kids to start with cash because it is tangible and concrete, and having a piggy bank is still a great way to teach kids about money and you can even get these multi slotted piggy banks now that have four slots for spending, saving, sharing, and investing. They've evolved as well, but realistically, as soon as they open a bank account, a youth account, they're going to get a debit card and then they're going to be able to withdraw cash, but they're going to be able to spend using that debit card. They're going to either in stores or online. It's really important to teach them that even though you're not handing over cash, where there's a visceral sense of loss like you're actually losing something when it's digital. It just doesn't have that same feeling, so you have to bring that feeling back and some of the ways you can do that are by leveraging these digital tools. In Canada, all the banks have these built in, they have mobile banking with a lot of built in tools, like tracking tools to help track your spending, categorize it, create budgets, notifications, and alerts. Using those tools can help bring some of that awareness back, especially on the spending side, because spending has become so frictionless. It's so easy to spend with tapping your card, your phone, so you want to try and bring back some of that friction by reminding yourself, setting a notification or even on your smart phone, on your watch. If you have one of those, you'll get pinged every time you spend money. But it also helps you know what's going on, it's so easy to check on your phone and see what's my balance, when's my visa due, how much are my upcoming bills? It really does help you have more control over your money if you use these tools. And for our kids, they're so comfortable with digital tools and they're on their phone a lot. I think that if you just show them a little bit and then they'll figure a lot of it out on their own and they'll be teaching you.
Chris Cooksey: Yeah, that's absolutely true. Now before we close here, maybe just talk about the book a bit and where people can get it and that sort of stuff.
Robin Taub: Yeah, thanks Chris. The book is called, The Wisest Investment: Teaching Your Kids to Be Responsible, Independent and Money-Smart for Life. It really is written for parents to help them teach their kids about money. Parents who feel like they may not have the money, the knowledge, or maybe they're not doing a great job themselves, this will really help put them at ease and give them the information that they need, what to talk about at every age and stage under those five pillars of money that we talked about. And the first chapter really, is for parents to help them get their financial house in order. I talk about 11 healthy habits of financial management, and then the next four chapters are for each of the different age groups we touched on, like young kids, preteens, teens, and young adults. It's a quick, easy read and it's available on all online bookstores. If you go to thewisestinvestment.com, there's a link to where you can purchase it. Most people do buy it on Amazon, but there are other online book retailers that carry it.
Chris Cooksey: Awesome. And your last name is spelled T-A-U-B, if people are looking, so Robin Taub. I want to thank you today, Robin. I took some notes so my kids can look forward to avoiding me this weekend, so they don't have to hear about them, but I will win. Thank you very much for taking the time today.
Robin Taub: Thanks for having me, Chris. Thank you.
Chris Cooksey: Reach out to us at advantagedinvestorpod.ca. Subscribe through Apple, Spotify, or wherever you get your podcasts. Please contact your advisor with any questions you have. Thank you for taking the time to listen today. Until next time, stay well.
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