Why your kids need an RRSP

This works,

To boot my 5 year old gets an allowance for breathing. I use this allowance to teach fiscal responsibility and prudence. Nothing as a parent is more securing than listening to your child say words like: savings, interest, gold, stocks bonds and of course taxes.

Do you really care right now if they understand the fine points? The fact that they know a portion of allowance/ income is for saving then taxes then fallowed by essentials and finally fun stuff teaches restraint.

The pride as a perent to know at age 5 your child has university, a down payment for a house in the bank or a huge bank balance is its own reward.

Teaching the discipline of saving money is the hardest lesson to learn and unfortunately no school class teaches the nuts and bolts of a financial plan that is sound.

For parents this should be automatic sense, even if junior becomes a construction worker this parenting approach will ensure that, " the kids are not pushing your wheelchair off the peer in old age to collect your life insurance"... humor...

You get the point, managing your childs finances well ensure a very grown up parent too. If juniors rate of return is better than yours its time to rebalance your financial plan. This makes sense as most parents are way more conservative with their childrens investing as they are with their own.

I have seen parents portfolios VIX 40 to 60 % in the last 12 months curiously their childrens holdings have in most cases held value and in some cases made a little. This is a protect the money attitude parents have when they do this for their kids. Usually perents will not invest for their kids in any instrument the Child can not spell and mon and dad can't explain.

It is allmost ironic that the truth of, " out of the mouth of babes and blessed are the children" applies even more so to a childs financial holdings? They must be in the know?

why don't we just send our pay cheques to the goverment, And they can send us a percentage at the end of each month,
Then they will have total control of our lives, Seems that is what they are trying to do. I say go to heaven . They want a 9 year old to claim his income ???? come-on are they capable of running our country??? hardly. Let alone invest in RRSP when only 31% have invested .

pretty good idea, just wondering if we have to file a separate income tax return for them to create the rrsp room or just declare their income in the dependentssection of our tax return and they will have the rrsp room accumulated

RRSP's are the solid investment thats what many people would have you believe. Many people of the post war baby boomers are now ready to retire. These people have religiously put money away in investment funds as suggested by governments and economists. Too often in the past I heard the following statement market down for profit takeing. Gordon Powers suggests that young people should invest in these packages. When short term investment is treated the same as long term investment this problem will aways exist. Why should some one put away money that is unprotected in a fund so someone who has the time and knowledge to watch the market on a daily basis and clean out these accounts at advantagious times. Governments around the world must find an answer to this problem

while the current system is letting a great many of us grown-ups down....NOW is the time to enroll our children into it. the earlier one is introduced to the minutae of servitude, the less resistance later on.

however, i'm a little dissappointed the hotline to turn other kids in was not given.

Have kids declare their earning. Give kids a chance to actually earn and save money!

The BIG trick is teaching kids the VALUE of money and HOW to save!

I agree to a point, having working youth declare their income not only teaches them the truth about our monetary system, it also does build up RRSP room. Coincidently, kids cannot hold an RRSP in their own name until they are 18, however, kids can have high-interest savings accounts of their own.

In our case, the kids all started with youth appropriate bank accounts, called Getting THERE, (Scotia bank). As they earned money from jobs, (T4 income we declare, babysitting?) 1/2 of everything they "earned" (allowance not included unless by their choice), was put into high interest savings and they are kept informed about interest etc.

As they are all now teens, they are responsible (under Mom's tutelage) to transfer 1/2 of every net paycheck into the savings account under threat of we will cut up the bank card if they don't! In addition if they access the HI account via a store transaction, it cost them 5 bucks in fees every time. If they want to use the money without fees, they have to transfer it into their regular account online. We can track this and they are too lazy (lucky us!)

The BIG TRICK!

How to save is fairly easy!

DO NOT buy everything they want for them. Very early on, we started getting smaller and fewer gifts at Christmas and birthdays for the kids. Instead we would give some cash. We always set a budget, overall, then divide by 3 (3 kids). After we buy some stuff from the proverbial Christmas/birthday want list, we then see how much cash is left and put it in their stocking or a card. We have always been very open about it, of course we waited until the youngest one found out about the The Santa Clause. We encouraged our extended family to do the same.

Once kids have money in hand, they should be encouraged to buy the things they want. Surprisingly, many kids soon learn to hold the money till they have sums I no longer want to carry around! The point is, if you let them learn to spend their own money, (as opposed to money they just watched you take out of your wallet or the bank machine to give to them), they learn how fast it disappears. This naturally teaches them to save for things they want. Just stick to your guns! My kids have 4 game systems and dozens of games. As parents, we bought nothing. They all have cell phones and they pay for them. They are allowed to buy what ever they can afford (with-in reason of course)

To value of their own money.

I'm not talking about $1 plus $1 = $2.

This has to do with learning that money is a commodity you have to work to get, to then use to get the things you really want. Earning it can be difficult and spending money foolishly will leave anyone (with any more sense than a billy-goat) with buyer remorse. Watch a kid who has just spent his money on a chocolate bar, then decided he wants the comic instead. If you, the parent, can stay strong and say, “well... earn some more money and save it next time till you have enough for the comic”, this will work! But you have to start young! Like... Grade 2!

Allow them to earn extra money - Young kids (6 and under) will play "lets clean up". After age 7, getting help around the house is like getting them to wear a coat in cold weather. There has to be a real incentive. Money always works, but you can't just give it to them. This is a bit of a long explanation, but it is relevant.

We have three fine young adults in our house. They were younger and not so fine in the not so distant past. Fighting, tantrums, "tornado house" syndrome 23 hours a day. It was a constant battle. This behaviour was moving outside the home as well.

My oldest, (a girl), got pink slipped on the bus one day. Fighting. WOW! Talk about conflicted! As a Dad, I was pleased she would defend herself or her siblings. As a parent who might end up losing time at work so as to drive her to and from school, I was not pleased at the public display of her temper. As a result of some fast talking on my part, the principle allowed a meeting between me and the other parent, then the kids and we worked it out. We ended up being friends with the family. Go figure, eh?

During the discussions with this parent, I asked her how she dealt with these issues, since she proclaimed to be a no spanking, no yelling, holistic medical type. (yes, I felt inept and like a bad parent). She said she just fined them, took away allowance and money given for birthdays and Christmas. Of course, me being an accountant / consultant, the light bulb in my head immediately went super nova!

I went home and gave my idea to my wife. I had to tell her about three times because I was way to worked up about it. This was going to solve all our problems with discipline, (yes, I really was that naïve). My good wife listened, asked questions, gave suggestions and after a couple of days of me insisting I had the answer, WE came up with a pretty good idea.

(Allowance + Chores) + a PAID chore list - THE FINE LIST = kids weekly income(loss)

Sounds Complicated, I know. It really isn't. It goes like this;

1- Each child gets a weekly allowance equal to ½ their current age. Your 7? You get $3.50 a week. This can be spent however they like, throw it in the garbage if they want. (well not really the garbage, but you get the point). Every six months, they get a raise, So at 7 and half, the kid gets $3.75 a week. This gives them something to anticipate. Doesn't sound like much, but is surprisingly effective.

Now, along with the allowance comes a list of things you are expected to do as a member of the family living in this house. Like; Clean your room. Pick-up your toys. Do dishes after supper. Do your homework. You get the idea. Basic every day stuff that they need to do just to be considered human. Failure to complete these basic chores does not mean allowance is not forthcoming, however, the kids will receive a fine. (more about this later)

2- Every house parent likes a helper. So once they will no longer play, “lets sweep the floor”, offer them money. Keep the chores simple, real in value, and the $ amount reasonable. We have one daughter who would iron clothes and watch TV for hours if we let her, as long as she got paid $0.75 piece rate for the ironing. Yea for US. Good for her. We spent a fair chunk of change for that little god-send, but she learned a work ethic, If I want it I gotta earn it! We started out lower, but she actually negotiated a higher rate. Talk about learning young!

Talk to your kids about what chores are “family” chores and those things that can offer extra cash if they WILLINGLY and FULLY complete the job. Lots of lessons and opportunity for family and personal values discussions there. Kids must get their parents agreement about what needs to be completed BEFORE doing it. My kids pulled some fast ones. They would say they did stuff everyday if they could get the money for it, even if they didn't do it or need to do it.

3- The FINE LIST. This is always fodder for a heated discussion with other parents. The good points that come out of this, when properly used are unlimited. The bad points, not many. There are a few rules though.

Be fair to the kids. This is not a means to make money or get free labour!
Be consistent. Make lists and stick to them!
Always write everything down in the same place. You will not remember what you fined them for last week, when the last time you paid allowance etc., and surprisingly, neither will they! So get a small binder that you can add loose leaf paper too and start a fine / allowance book.
Write down the date, the reason, the $ amount of the fine or earnings
Do not give your kids advances on allowance. It teaches them that credit can be abused. We went through that with our daughter for awhile. She constantly owed us because we caved, advanced her money, then her fines came to more than she earned!
Update the list whenever you pay the allowance, deduct the fines first. This will take work, however, if you start early, stay consistent and are fair about it, the kids will take it on themselves to make sure they are getting their money. Another great benefit is they learn basic bookkeeping and math!
Be aware that as kids age, the fines and earnings for chores can go up, but the $ amount isn't the biggest issue here. The learning curve is. Fines have to be representative of the seriousness of the issue AND the money the kids have available. (Note: if the kids never get any money at the end of the week, this is doomed to failure. They cannot learn if you are mean about it.)
Don't cave in! In the early stages of this little program, kids will end up owing their parents money at the end of some weeks. They will get fined more than their allowance. Let them suffer. You are not taking food, clothing or necessities of life here!
Fines for hitting or swearing or lying may be paid to the injured party. We did this to show the kids how it works in real life. They quickly learned they don't like handing out money!

Again, DO NOT CAVE IN! More than once my kids cried in earnest when I made them give me $0.75 at the end of a week because they owed me more in fines than they were getting for allowance and extra chores. They soon learned that they need to behave and follow house rules and do what we ask or they agree to. This last point is important. If the kids agree to a paid chore and don't do it, they don't get paid and they MAY even get an additional small fine to help pay someone else to do it.

A sample fine list. Take into account the age of the kids. So lets say you have two kids, Age 8 and 10. respectively, they will get $4 and $5 a week for doing nothing other than household chores and eating your food every week.

Fine list
Item
$ value
Not cleaning room
0.25
Not finishing paid chore
0.5
Hitting sibling
1
Swearing at somebody
1
Not finishing homework
0.75
Leaving toys / personal stuff all over house
0.25
Lying
0.75

You have to tailor this list to your kids and their personalities. Be open with them, explain it, answer all their questions honestly. It is going to generate some wild family discussions, but they will be great!

Extra chore list
Chore
$ value
Sweeping a room
0.5/ room
Cleaning bathroom
2 per car
Clean the car
2 per car
Wash windows
1 /per window

Again, keep an eye on how often they say they are doing these tings, make them get your approval to do it and follow-up. Inspect their work and make them fix it if it isn't right. The car does not need to cleaned everyday, nor should the kids be allowed to trash it up so they can charge you for cleaning it!

Fine /Allowance Book

DATE EVENT KID AGE 10 KID AGE 8
Day 1 Hitting To sibling -1 1
Didn't clean room -0.25
Day 3 Clean car each 2 2
Day 7 Allowance 5 4
Net for week 6 6.75

This system works. I've seen the benefits 3 times, first hand. In the above example, I guarantee the older child will be very upset that the younger sibling got more money. This would be especially true because the older one had to contribute to younger child's weekly take because of the hitting offense.

I've explained this to many younger parents and some have come back to me with very positive results. It takes work and dedication, but the end result is very worthwhile. This is mostly about money sense and work ethic. All of the other benefits I may have mentioned are icing on the cake!

I'm still a loud mouth at times, but my kids never have a problem with money, savings or getting and keeping jobs. They all have a very real understanding of right and wrong the need to be fair. I have to add that, as parents, I think my wife and I did a reasonably good job in other areas as well.

The idea of this calm and rational approach to discipline is something I would have liked to have grown up with. My parents did a great job with me and my sibs, but I didn't have a lot of money sense. I myself was not a perfect father, I was unfair and I did mess up even with this program. But I like to think it helped me be better than I might have been and my kids have a better understanding of money, credit and savings than I did at 30!

Not good advice at all here in Quebec.

When I filed my son's income taxes a few years ago (summer jobs etc), Rev Quebec then deducted that same amount from the child tax credit that I claimed on my own taxes.

Who is kidding who about RRSP's Chikdren don't need an RSP or social ins # until they go to work for some employerwho pays them a wage or when applying for a student loan (a devastating anchor for life and a terrible idea) or having money put in an RESP.

This gov't just wants to track every breathing momentand wants to tax the air you breathe and yet they spend money on Afghanastan.

1. As above children can't start a RRSP or TFSA until they turn 18.
2. Per CRA if you earn income you should report it! If they get a T4 from the job this is an absolute must but even without one they still should be claiming itr.
3. One disadvantage in this is that they could end up paying CPP & EI in some situations. These start at $3,500 & $0 respectively and will cost a fair bit. Also as above it can grind some dependent tax breaks for the parents.
4. For you business owners out there don't pay your children more from your business than you would pay a non-family member as CRA loves to audit this. During the audit they disallow the deduction in the business but still make the child pay the taxes (double whammy). Think this doesn't happen; guess again I recently worked on an audit where an 11 year old was making 30K and his 13 year old sister was making 50K. The tax bill was terrible.
5. George student loans are a great idea. Where else can you get an interest deferred loan with no collateral that portions of are likely to be forgiven. The only thing to be cautious of is to become educated in a career that pays (doctor, lawyer, accoutant, engineer etc).
6. A better idea is to get your kid a cell phone and credit card early (they better be responsible though). Build their credit rating so when they go to buy a home in their twenties they have a good rating (700+ is easy). This will save them huge amounts of interest later in life. This was a situation with a friend and myself, he had never had credit so the banks would give him only a high interest loan while I, as a long-time credit card user, had a great rating and managed an additional 2.5% discount on the loan.

When I was 13 my parents started a game with me to teach me finance and investing. I was given 1K of "fake" paper money and told I could invest in any stock I wished to (based on the closing prices for that day). I would actually get 10% of my gains (up to $300) and I have to pay 1% for any losses and the game would run for the year.

To my father's utter amazement 6 months later he had to pay me $300 which started a real investment account for me. What had I invested in to 4x my money that quick; 40% in a small business called Diamond Fld which went from $3.25 to $56 a share during that time. The potential power of investing has stayed with me since. This is a game I will play with my children also.

Lenghty post Steve, but well worth the read. My daughter is almost five and I can see something like this working extremely well.

Just like us, our kids will get taught nothing about money or personal finances in school, so it's up to us parents. I'm happy to have had a father that dedicated some time to teaching me about money, and that the world revolves around it....and the people who tell you that money/savings isn't that important, are the people who will stil be working at WalMart at age 70 because "it's not fun or exciting to save money". When I'm sipping Bahama Mama's in the sun at age 55 or 60 somewhere hot for the rest of my life, I'll enjoy the fact that that I didn't have all the "toys" that my friends wasted their money on and that watching my money grow in a savings account made me a "tight-ass money nerd".

Most people can barely save $100/ month because they have to have everything that their neighbour has, plus more. Teaching kids the value of hard earned money and savings at a young age is probably one of the top five life lessons that they could have. And if you don't believe me, take a drive through the U.S. and see what "no savings" and "living beyond your means" has done.

And no, I'm not some some white collar guy who makes 100K plus/year, I'm your average 30-year old construction worker who makes an average living... Now if I could only get my wife (she's a nurse with alot of school debt) to stop spending our money like a Stepford wife, maybe my retirement dreams will actually come true. If not I'll have to "mail-order-bride" her to some dumb American who loves to watch his money dissapear for no good reason.

I am planning to teach my kids about RRSP's. If I had taken advantage of them when I was young, I would have been better off right now. The issue is that when I was young, I only had myself to spend on. Now I have a mortgage, children, etc that take quite a bite out of the paycheque. If I had started when I was young and put money into RRSP's then, by compound interest, by the time I was ready to retire, that money would be worth quite alot and I wouldn't have to worry so much now about my retirement!

RRSP's are a government and big financial companie money grab. Believe you me you do not fully understand what the cost of RRSPs' are untell you have to use them when you retire. What government and the financial institutions do not tell you is the risks and the money you will have to pay back to the government in taxs'. just talk to some seniors that are retired and had to use their RRSp to buy some thing or to do renovations on their homes, well they were hit with having to pay more taxs, so to all you who preach RRSP you are not being honest with the public and are not fully discloseing the full truth about RRSps. I had RRSPs' and cashed them in and will never again buy another RRSP. There are some sad stories out there , just talk to those who had to use their RRSP and what it cost them.

I am planning to teach my kids about RRSP's. If I had taken advantage of them when I was young, I would have been better off right now. The issue is that when I was young, I only had myself to spend on. Now I have a mortgage, children, etc that take quite a bite out of the paycheque. If I had started when I was young and put money into RRSP's then, by compound interest, by the time I was ready to retire, that money would be worth quite alot and I wouldn't have to worry so much now about my retirement!

I think it's great that people recognize the importance of educating children about money. We bought our oldest son "The Wealthy Barber" for his 10th birthday (and made him read it and discuss it with us) and gave him enough money to add to what he had, so he could afford to invest in his first mutual fund. My in-laws thought we were nuts. We bought my youngest son "The Automatic Millionaire" for his 10th birthday (as above). They both receive an allowance for work done around the house and appropriate behaviour, they both contribute half of every cent they receive (allowance, birthdays, part-time job) to their savings and routinely add to their mutual fund accounts. I believe they both understand the importance of "paying themselves first". Any opportunity I can get to improve their standing in life both now and in the future is worth capitalizing on. Thanks for the point.

You can actually start an RRSP at age 16. You are unable to invest in mutual funds until age 18. (Money would go into RRSP Savings Deposit or if you have the minimum could be used to purchase a GIC within the RRSP) However, encouraging your teenager to start an RRSP if they have a part-time job is a great idea. It will teach them to budget their money to build up assets and to do it on their own. We should be teaching our children how to save and the benefits of it so that they want to do it on their own and understand the value of doing so. I have seen many parents set up accounts for their children to put money into but they don't want them to be able to access it. What are you teaching them? That Mom or Dad will have to safeguard their savings because they're not responsible enough to manage it? Maybe not, but how will they learn autonomy? But I digress.
Even if you are paying minimal tax, receiving a small refund is still beneficial. You are actually able to defer your tax deduction indefinitely but must take into consideration the time value of money. Unless you are talking about a large sum, it would likely be more beneficial to claim the deduction right away and then re-contribute. TFSA is also a good way if you are in a low tax bracket, but you do not earn contribution room until you turn 18. Seeking out financial advice from a professional can help you plan the best way to go about this. And having your son or daughter participate in the meeting and receive the explanation of what they are doing and why it is important can be invaluable.

What if the kids just open a savings account, that way when "Satan" AKA "The Government" comes for thier extortion money the youngster only has to pay once.
When tough times come for Him or Her, they will have to pay taxes and penalties to remove it from the" Devils Grasp", a Savings account they can go to the bank and just get it.
We as Tax Payers lend enough money to Wall Street to play with, and now we should let them rob our children.
Good Idea, NOT.

BANKS AND GOVERNMENTS....every January and February..what are they pushing? RRSP'S of course! Let me say that again. BANKS AND GOVERNMENTS. They are 100% TAXABLE. Sure you get a tax break up front, and your money can grow tax differed. But they are patient. They will wait. They tax you on the weight of the harvest as opposed to the weight of the seed. They wait for you at the end..oh because you'll be in a lower tax bracket right?? Perhaps. Did you know there are much much more effective ways to save? That are much more tax effecient. Where you can pay NO tax (and I'm not talking about a TFSA) Canadians it's time to get EDUCATED. If you believe that BANKS have your best interest at heart..sorry to tell you this, but they are not in business for you or I. They are in business for their shareholders. They are going to sell you on what's best for THEM! There are other options!

Please do yourself a big favour. DO BUSINESS IN A MANNER WHERE YOU GET TO KEEP MOST OF WHAT YOU EARN NOT THE GOVVERNMENT The CRA are THIEVES, LIARS, CHEATS AND CONSPIRATORS against the hard working people of Canada. All the money wasted by the CRA could pay for hospitals, schools, sewers, municipal transit etc. A user fee based tax system would pay for everything. THE GOVERNMENT IS AFRAID OF THE IDEA OF "laying off not terminating" CRA staff 100%. The unions and the government ministers and dept. heads would resist the idea of being "laid off with no severance". Why shouldn't they have to live by the rules we have to live by and not be protected as we aren't protected. CRA employees names should be publishedm in the paper monthly.

Kid doesn't have enough money for their hambarger or mcdonald meal , where do u think they get the money for RRSP ??? i have a big family and most of the people in the family right now got lay off and i support all of them now by myself , i can't afford to buy a nice winter jacket for myself and my family member include my loving kid, so if the government try to encourage the kid put money into RRSP , that mean they try to tell kid go around and steal money and kill the low income people right now and take away their responsible in the future... example , my kid 16yr rite now if they start RRSP till they are 65yr , that mean they will have lots of money into RRSP and by the time they grow up and tire the government dont have to care for them anymore , b/c they already RRSP ... government not try to help kid or poor people but what they did is try to steal benefit and money from people and the kid..