How to have the money talk with teens entering post-secondary school

Mark Kalinowski is one of many Canadian parents whose teens are going off to post-secondary school in less than a month. 

When it comes to back-to-school preparation, it's quite different than buying pencils and binders to throw in a backpack. It can be challenging for parents to set kids up for success financially while making sure they learn hard financial lessons on their own.

“We were always upfront, and we said, 'You guys don't have to worry about going to school, like we'll get you in and through for your undergrad,'” Kalinowski said. “But I was always pretty clear, you know, 'Fun is on you.'"

Kalinowski said he’s talked to his daughter, who’s headed to university in another city, about things like part-time work, saving and credit cards.

“I'm very careful with my own money,” said Kalinowski, adding that while he talks to his kids about what they do with their money, he plans to try and distance himself from his daughter's financial decision-making once she goes away to school.

A recent survey by TD Bank Group found that two-thirds of Canadian parents are not highly confident in their children's financial knowledge for their current age. Many remember making financial mistakes due to a lack of knowledge when they were younger.

“What really struck me was that close to 70 per cent of Canadian parents don't feel prepared to support their kids’ financial literacy at home,” said Emily Ross, vice-president, Everyday Advice Journey at TD. 

“The first step is to give yourself some grace, because you're not alone,” she said. 

You can start by involving your teen more in household finances, such as showing them your own budget, said Ross. They can also speak with a financial advisor about things like debt, credit scores and budgeting.

Before talking to your teen about finances, parents should talk to each other and share some of the advice they received about money, good or bad, said Jessica Moorhouse, a financial educator and host of the More Money podcast.

“It's really important to identify what worked and didn't work in your life," she said. "Then you can impart some maybe more up-to-date wisdom to your kids." 

Moorhouse said debt is one of the biggest topics that needs to be broached, especially student loans and credit cards.

"Usually what I hear from people is, 'No one talked to me about debt when I was in school,'" she said.

But that can lead to bad decisions around debt that are hard to shake off. 

Even if you’re helping them out with expenses during post-secondary school, Moorhouse said it’s a good idea to encourage your teen to work part-time while studying so they aren’t shocked by post-grad life. Teaching them to budget earlier will also "be something they can take with them after university."

“You're really setting them up for a much easier start to their real adult life," she said.

Those conversations can happen even earlier, too, she said — talking to your kids as they enter high school about saving up and earning scholarships could help set them up for an easier time financially when they’re ready to start post-secondary, helping them learn valuable lessons about work and money at the same time. 

There are other life skills you can impart on your kids that will help them save money when they move out, said financial planner Janet Gray in an email, such as making sure they can prepare meals, buy groceries and do laundry.

It’s also important to have a conversation well in advance about what you will and won’t be covering financially, said Gray. 

“Let them know your rules in advance,” she said, instead of waiting for a mistake or misunderstanding to arise. 

If your teen makes a financial mistake, whether racking up a credit card bill or spending their student loan money too fast, it’s important not to shame them or get angry, said Moorhouse.

“You want to be in a place where they will come to you when they have made a mistake, or failed in some way, instead of feeling like they can't come to you and then they have to deal with it on their own,” she said. 

“Then it could make matters worse, because they don't know the best course of action.”

This report by The Canadian Press was first published August 10, 2023.

Rosa Saba, The Canadian Press