Modeling Financial Behavior

by Colleen Craig, CPA, CA, FCIRP, LIT
September 27, 2023

September is always a season of change. As young children take their first steps into learning, older children begin to consider their options for work life or post-secondary education.

As parents, guardians and educators, we hope to give the children in our care a solid foundation in all areas of learning. As young people progress through different life stages, they encounter unique financial challenges that require targeted guidance. In this blog, we will explore age-specific recommendations and address the distinct financial challenges faced by three age groups: young children, middle/high school students, and young adults heading to college or university.

1. Young Children (Ages 5-12)


  • Understanding the Value of Money: Young children often struggle to grasp the concept of money's value. They may not comprehend why some items cost more than others.
  • Impulse Control: “Mom, can I have…” is an often-heard refrain from the young children in my house. As we all know, children in this age group frequently lack the ability to resist immediate gratification. They may spend their allowances as soon as they receive them.

Goal Setting:

  • Start with small, achievable goals. For example, encourage them to save for a favorite toy or a special treat, or encourage them to save up for a present they want to buy for someone else.
  • Use visual aids or charts to help them track their progress and understand the connection between saving and achieving their goals.
  • Teach delayed gratification by explaining that waiting and saving can lead to more significant rewards in the future.


  • Begin introducing the concept of budgeting by helping them allocate a portion of their allowance for saving and spending.
  • Use relatable scenarios, such as a planned family vacation or trip to the movie theatre, to illustrate the importance of budgeting.
  • Reinforce the idea that budgeting is about making choices and prioritizing their spending.

Parental Involvement:

  • Parents play a crucial role in modeling responsible money behavior. Discuss your own financial decisions with them.
  • Encourage open conversations about saving goals, emphasizing that saving can be a fun family activity.
  • Consider offering rewards or incentives for good saving habits to reinforce positive behavior.

2. Middle/High School Students


  • Social Pressure and Peer Influence: Adolescents often face significant pressure to conform to peer expectations, which can lead to overspending on clothing, gadgets, or experiences. 
  • First Jobs and Earnings: Part-time jobs can provide newfound financial independence, but they may not fully understand how to manage their earnings wisely. This group is highly targeted by marketing campaigns as they are the group that has the highest percentage of disposable income as they generally have no financial commitments and no debt.

Goal Setting:

  • Encourage students to set specific financial goals that align with their interests and aspirations. For example, saving for a smartphone, a car, or college expenses.
  • Teach them to prioritize their goals based on importance and feasibility, helping them understand that not everything can be a top priority.


  • As they start earning money, introduce them to more detailed budgeting practices. Help them create a comprehensive budget that includes income, fixed expenses (like phone bills), variable expenses (like entertainment), and savings.
  • Emphasize the importance of tracking all expenses, discussing the value of creating expense categories to identify areas where they can cut back.
  • Teach them to distinguish between needs and wants, encouraging them to prioritize their spending on needs while budgeting for wants.

Parental/Teacher Guidance:

  • Parents and teachers can play a pivotal role in guiding students to make wise spending choices. Encourage open discussions about financial decisions and help them to understand the “siren call” of marketing efforts that specifically target their peer group.
  • Discuss the value of long-term savings and investing, even at a small scale. Introduce them to the concept of compound interest to highlight the benefits of early savings.
  • Consider involving them in real-world financial decisions, such as grocery shopping or planning a family vacation, to impart practical financial skills.

3. Young Adults Leaving for College/University


  • Temptation of Student Loans: Many young adults may face the allure of student loans without fully grasping the long-term implications of debt repayment.
  • Living Away from Home: Managing finances independently can be overwhelming, especially when they are responsible for tuition, housing, and daily expenses.

Goal Setting:

  • Assist them in setting academic and financial goals to reduce reliance on loans. Explore scholarship opportunities, living at home while going to school, or only attending school part time, and working part-time jobs to supplement their income.
  • Discuss the importance of establishing an emergency fund to cover unexpected expenses.  This may mean delaying the start of their education for a year or two so they can work to save up funds to support themselves through school.


  • Stress the need for a realistic budget that covers tuition, living expenses, textbooks, and leisure activities. Emphasize the importance of finding cost-effective solutions. The bank of “mom and dad” is not a realistic budget item for many parents.
  • Encourage them to monitor their budget regularly, adjusting it as needed to ensure financial stability.
  • Teach them to resist the temptation to overspend on non-essential items and the value of prioritizing essential expenses.

Parental/Guardian Involvement:

  • Maintain open communication about their finances, offering guidance on responsible credit card use and avoiding unnecessary debt.
  • Discuss the consequences of borrowing too much through student loans and the long-term impact on financial independence.
  • Encourage them to seek financial advice from trusted sources if they face financial challenges during their college or university years.

Introduction to Investing and Financial Systems:

  • As young adults grow older, it's essential to introduce the concepts of investing and provide a basic understanding of how the Canadian tax, investment, and banking sectors function.
  • Explain the difference between saving and investing, emphasizing that investing can help their money grow over time.
  • Discuss the benefits of contributing to a Registered Retirement Savings Plan (RRSP) or a Tax-Free Savings Account (TFSA) and how these can be valuable tools for long-term financial security.
  • Introduce the idea of diversification and risk in investment, helping them understand that while investments can yield higher returns, they also carry certain risks.
  • Encourage them to explore resources and consider seeking advice from financial professionals to make informed investment decisions.

Each of the above-mentioned age groups faces its own set of financial challenges, and providing tailored guidance is essential. By modeling responsible financial behavior, setting clear goals, teaching budgeting, and involving parents, guardians, or educators in financial discussions, we can empower young people to make informed financial decisions and build a secure financial future. Start early, educate consistently, and provide ongoing support to equip them with the necessary financial skills for a successful life journey. As they grow older, introduce them to the concepts of investing and the workings of the Canadian financial landscape to prepare them for more complex financial decisions ahead. 

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