Teaching Kids About Finance in the Digital AgeCarly Broetz, BBA, Wealth Advisor
If you’re having a hard time pulling your (grand)child away from their smartphone, you’re not alone. A recent CBC article shed some light on the complications emerging from smartphone use. Meal delivery services have become so ubiquitous that high-school students are ordering meals to school. One high school reported 50 to 70 deliveries in a day before a ban was put in place.1
It may seem harmless, but there are concerns that deeper behaviours are being cultivated. In this age of smartphones, will children adopt poor spending and saving practices if things like meal delivery services become habitual?
Indeed, the digital age has brought new challenges when teaching children about finances. The basic lessons haven’t changed: teaching the virtues of saving and compounded growth, imparting good budgeting and spending behaviours, and helping children to set and achieve goals. Instilling these habits at an early age can pay dividends down the road. However, these lessons may need to adapt to new realities:
- Debt perceptions — Canadians were once known for having moderate debt levels. Just 30 years ago, our debt-to-income ratio* was around 85 percent; today it is in excess of 175 percent.2 With interest rates at historical lows, debt has become more accepted. Children need to be taught the dangers of holding debt, especially the high cost of debt associated with credit cards.
- Social media influences — Social media has perpetuated “FOMO,” the fear of missing out. Yet children often fail to recognize that social media is not a true representation of reality, and trying to keep up with celebrities can be a recipe for “insta-debt.” Children should also be taught the dangers of social media in compromising privacy and potentially putting finances at risk.
- Instant gratification — The digital age has fed our appetite for instantaneous results. With access to immediate information and one-click shopping, we’ve been conditioned to expect goods (or gratification) at the tap of a finger. Succumbing to spending temptations can be expensive and children should learn the importance of sacrificing immediate “wants” for later “needs.”
- A cashless society — As we move towards a cashless society, with payments by smartphone and credit card just a tap away, keeping track of expenditures may become more difficult. This may mean that keeping accurate records and exercising budgeting discipline will become even more important.
A Sign of the Times?
Even the classic board game Monopoly, in its 85th year, has had multiple facelifts to ensure its relevance.3 A new cashless Monopoly uses electronic transactions, a mini ATM and debit cards. Another edition incorporates “voice banking,” in which players command a voice assistant to manage financial transactions—a sign of the times.
Likewise, the financial lessons we impart on the next generation need to adapt to these new challenges. If you need assistance or require resources to support these important and necessary conversations with kids, please reach out. We would be happy to help.
Notes: *outstanding debt divided by disposable income;
2. cbc.ca/news/business/debt-to-income-ratio-second-quarter-1.5282226; Statistics Canada T3810023501;