Money tips for you and your teens
When your children enter their teens, life changes in many ways — including your financial life. Here’s a look at some of the major financial planning themes that arise as you navigate their teenage years.
It’s now on the horizon — the day when university or college begins. Typically, that means adjusting the asset allocation of your child’s Registered Education Savings Plan (RESP) to become less growth-oriented and more conservative. But we also need to determine whether a portfolio tilted toward fixed income will keep you on track to meet your goal.
You may also need to review your education savings goal, now that you have a better idea of your child’s plans and aspirations. Will he or she be living away from home? Is there the possibility of grad school?
The working teen
The pros and cons of letting your teen work part-time should be carefully weighed. Through work your child becomes more independent, builds confidence, learns new skills and, of course, earns income. However, having a job or working too many hours can interfere with extra-curricular activities and studies.
If your child has a job, you’ll need to have a discussion about who pays for what. Is your child now responsible for such expenses as going to the movies, buying gifts for friends, or even covering their cell bill? If your daughter or son has a good-paying summer job, is your child expected to contribute to the RESP?
When your teenager gets a summer job or works part-time during the school year, consider having them file an income tax return to maximize Registered Retirement Savings Plan (RRSP) contribution room for future use.
There are other advantages to filing. By filing, your teen may be able to get a tax refund if the employer withheld income tax from your child’s paycheques. In addition, your child needs to file a tax return to qualify for the GST/HST credit. The quarterly amount is payable if your child is 19 or over; no income is required to qualify.
On the path to success
It won’t be too long before your teen is off to college or university and responsible for managing their own finances.
Now is an ideal time to instill good money habits. You may want to have a discussion around needs versus wants, especially if you see a pattern of overspending. Also, whether your teen is spending personal income or allowance, you may want to introduce the idea of keeping a budget. Tracking where dollars have been spent can help manage future spending.
Each teen is different. The key is to have a plan in mind that makes sense for you and your child. And most important, communicate the plan and keep two-way communication open.
If you’d like to discuss any of these topics or are looking for tips or strategies for your teen, reach out to one of our advisors.