The early teens are a good age for children to start shaping their dream of the future and start preparing for them — with your help, of course. Financial expert Alison Griffiths offers her advice on how to help your 13-15 year-old identify and save for a longer-term goal.

Why are longer-term financial goals important at this age?
Alison Griffiths: While there’s a vast difference in financial maturation among 13-15 year-olds, these children probably already know the basics of saving for something they want. That’s normally something relatively short-term and comes with a price tag, like a video game for instance. But by now, they likely also have a dream of their future, even though they may not be able to articulate it fully. That’s where parents can really help teach and empower their teenagers so that they can start setting themselves up for the future they want.

How important is it to define their goal for the future?
Alison Griffiths: At this age, they may already know what they want to be when they grow up. They may have a definite profession in mind or something more general, like they want to work with animals. Help them put a strategy in place to make that happen and that allows them the luxury to adapt their goal as they get older.

So it starts with a strategy, even though there may be no specific dollar amount attached their goal?
Alison Griffiths: Yes. Help them look at career options in their area of interest, what education or training they’ll need, and start showing them how much it might cost and the different ways they can reach that financial goal; for example, 1/3 from registered education savings plans (RESPs), 1/3 loans, scholarships and grants, and 1/3 from their savings or your help. This is a great age to involve them in saving for their future.

To get the basics about RESPs, how they work and the various options you have, visit BMO’s Education Savings web pages. And use the RESP Savings Tool calculator to get an idea of how much you’ll need to save for your child’s education.

How do you engage kids in seeing the value of an RESP?
Alison Griffiths: Tell them how it works, if they already have an RESP, and how it can be used. Also let them know about the Canada Education Savings Grant because they get excited about free money. BMO’s RESP brochure covers the basics.

How do you help them contribute?
Alison Griffiths: First of all, help them understand that this is their money and it’s there to help them get the future that they want. Next, build their RESP contribution into their allowance. So if they’re getting $10/week, help them decide on an amount to allocate for their RESP, $10 a month perhaps. But don’t stop there: You also need to keep encouraging them and reinforcing their savings success.

What if they want to save for something other than education, like a big-ticket item?
Alison Griffiths: Some big-ticket items can be considered longer-term goals for this age group — like a smartphone and data plan or a TV for their room. Since these items come with specific dollar figures, take this opportunity to teach them about banking products. It may make sense to set a weekly or monthly trip to a branch or go online with them to make regular transfers to a longer-term savings account.

You also want to tell them what you’ll do to help them reach that financial goal. Just remember that it’s their money to spend how they wish. If it’s something you think has value, like a new laptop, then you may want to contribute to their savings. If it’s something you think is a waste, then don’t contribute but do let them save and, ultimately, buy it.

Quick facts about RESPs
You can contribute up to $50,000 into a Registered Education Savings Plan (RESP) and get both immediate and long-term benefits:

  • Get a tax break now. You don’t pay income tax on the money you invest in an RESP for as long as it remains in the plan.

  • Get a tax break later. When money is withdrawn from the plan for post secondary education, it’s taxed at your child’s tax rate — which will likely be low since they’re still attending school.

  • Get a government grant. The Canada Education Savings Grant (CESG) matches 20% of your annual RESP contribution to a maximum of $500/year and $7,200 over your child’s lifetime.

Article by Suzan Bianchi.

Suzan Bianchi is an award-winning multi-media writer based in Toronto who has covered a wide range of topics, including personal finance, for more than 18 years.