Financial literacy is one of the most valuable life skills your teen can develop, but it’s often the most overlooked. With a solid base of understanding, they can be better prepared to navigate adulthood.
It’s important for them to understand money, savings, budgeting and expenses, as well as how deposit protection works.
For instance, the Canada Deposit Insurance Corporation (CDIC) provides federal deposit insurance. We protect eligible deposits such as GICs and cash, held at member institutions for up to $100,000 per account type.
Before your teen gets to that level, here’s how to build up from the budget basics.
Start with core concepts
Explaining simple habits, like setting aside a portion of allowance or income from a part-time job can have a huge impact on how your teen thinks about money.
You can create a basic budget template with them and fill it out together, discussing where their money is going and ways that they can save. Start by listing their income, then categorize expenses, such as entertainment, food, clothing, transportation and savings.
Set time aside once a month to review their budget, celebrate progress, and discuss any spending decisions they would handle differently next time. Regular check-ins help budgeting become an ongoing habit and normalizes open dialogue about money.
Introduce different financial options
As teens begin earning and managing their own money, it’s important they understand some common types of financial products and account types available to them, what they’re for, and how to use them:
- Chequing account: Used for everyday purchases, receiving paycheques or general deposits. A good choice for a teen’s first account.
- Savings account: Designed to grow money over time, best for short- to medium-term goals.
- Tax-Free Savings Account (TFSA): Helps maximize savings by growing them tax-free, providing long-term benefits.
- Registered Education Savings Plan (RESP): These help families save for post-secondary education.
- GIC (Guaranteed Investment Certificate): A low-risk financial product that offers guaranteed returns over a fixed period. This can help teens understand the concept of earning interest over time
Note: All of these are eligible for CDIC deposit insurance when held at a member institution.
Encourage informed decision-making
Understanding things like fees, interest rates and protection measures can help teens avoid common mistakes and build their confidence.
They should always feel like they can ask questions and you can show them how to get answers from credible institutions. For example, they can speak with their financial institution or use online resources, like financial goal calculators or budget planners provided by government organizations, such as the Financial Consumer Agency of Canada.
Developing financial responsibility at an early age is one of the best investments you can make for your child’s future.
You and your teen can learn more about different account types, as well as access our deposit protection calculator.