Have you ever asked yourself, "If I only knew then, what I know now"? You probably have, and it may have something to do with money. Although people sometimes don’t like to admit it, money plays a huge role in determining our lifestyle. Money is something we all struggle with, whether we have lots, or not enough. Money management decisions happen on a daily basis. If we could encourage one thing in our children, it would be to start saving small amounts of money at an earlier age.

Your parents probably said, "Don’t spend all your money in one place", but they may have missed some important words of wisdom, "Save some of your money because you will need it in the future". Of course, if they did, you probably argued with them and said that "it was your money and you would spend it as you pleased". But as children leave home and become independent, reality sets in, and the bills and expenses start to accumulate.

Parents must teach their children to appreciate the value of saving money and investing. Children don’t think about retirement, but as adults, we know that eventually you will get there, and when you do you will want to enjoy a comfortable lifestyle in your senior years. No one wants to be forced to work after retirement, but without the proper savings, this may not be an option.

Often children between the ages of 14 and 17 are starting their first paying jobs. This income is 100% discretionary and, as we know, children like to spend money. Peer pressure and society tells us to live life to the fullest, and constant advertising messages tell us that spending money on "stuff" leads to greater happiness.

There is an alternative. Encourage your children to save a portion of everything they earn from the moment they begin their first job. Consider this example: Johnny is 15 years old and he has his first summer job as a camp counselor and has already lined up a part-time job during the year at the YMCA. He expects to earn about $4,000 during his first year of work. If Johnny saves just $50.00 per month (15% of his earnings) he will be on his way to establishing a life long habit, called "saving money". Now if he continues this habit for 40 years and increases his monthly savings amount by 5% every year, things start to look very impressive. At age 55, Johnny would have accumulated more than $300,000 assuming an 8% rate of return.

The point of the story is not the actual numbers, but more about seeing the effects of starting early and saving for the long-term. Although life can throw many curves at us to change the outcome of our finances, you can develop a saving habit that will assist you through many of life’s challenges. We hope that by sharing this story with your children you can show them how important and easy it is to save money over the long run.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of Fundex Investments with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.