Five ways to help your children map out their financial future

Financial literacy

Financial literacy can help the next generation establish and grow their wealth.


Children may start formulating an understanding of money from an early age and parents play a pivotal role in teaching them how to have healthy and positive attitudes to finances.

Here are five ways for parents to establish a sound financial roadmap for the next generation:

1. Involve and educate your children

When it comes to financial education, parents should start teaching their children early and cover a range of topics to promote holistic financial literacy, according to Vivian Kiang, managing director and head of Wealth Planning and Fiduciary Services, Asia at RBC Wealth Management in Hong Kong.

“It’s always recommended to educate children early about money management – teach them matters like the meaning of finances, how to value cash and how to save for a rainy day,” she says.

Driving home the importance of good financial habits by taking the time to equip children with the tools, resources and skills will not only help to inspire confidence in decision-making, it might also give them a head start on their financial future.

2. Be a strong financial role model

Setting a positive example for your kids extends to financial matters as well.

Rohit Bhalla, executive director and team head at RBC Wealth Management in Singapore, shares that his experiences with his daughters went a long way toward helping them become aware of financial matters and understand the importance of budgeting.

“Children subconsciously pick up what they see around them. I used to get the girls involved in meticulous budget planning around family activities such as a holiday – the price of tickets, hotel stay, food, entertainment and sightseeing. That made them learn what their parents do for them and taught them how to stretch that dollar,” he says.

Budgeting and financial decision-making do not have to be taboo subjects. Make these activities a family affair by talking about goals, celebrating when you reach them and discussing how they were achieved.

3. Set clear goals

As you work with your children on their learning journey, you will help establish milestones such as saving a portion of their allowance and tracking their spending to keep the family on track to meeting goals.

This is especially important for parents who want to prepare their daughters with as much financial knowledge as possible when they enter the workforce. Bhalla points out that “a solid understanding of finances can be the key to empowering the child” to make informed decisions.

Whether it’s saving for university or setting a target age for retirement, having clear and achievable goals may help keep children focused and motivated to grow their wealth to meet their objectives.

With the trusted guidance of a wealth manager, a family may also discover areas that matter most to their financial situation. An advisor can provide support building a tailored wealth portfolio to ensure decisions made to meet today’s needs won’t compromise tomorrow’s goals.

“Financial goals are the key to empowerment – the ability to think long-term and balance how you spend your money on things today versus planning for things one, five or 10 years from now. I have always encouraged my girls to list their objectives, the timeline to achieve them and distinguish among short-, medium- and long-term goals,” says Bhalla.

4. Invest and strategize with the future in mind

Bhalla adds when it comes to wealth planning for the next generation, it’s important to think about the future and work backwards from there.

As a start, have conversations with your children about what assets, such as having a savings account or owning a car, they would like to build; come up with timelines and develop strategies to achieve their goals. Reflecting on his experiences with his elder daughter, Bhalla shares that they discussed how milestones, such as purchasing a car or property, were achievable with a well-thought-out strategy.

“She made a detailed spreadsheet with her revenue and cost lines. And she didn’t stop her contributions into the investment fund while working out her ability to pay her loans,” he adds.

Kiang says that when it comes to investing and wealth planning, every family may want to consider diversifying their portfolio into different asset classes to manage risk. “Children should learn the concept of balancing return and risk – what is considered a reasonable return and how can we mitigate the risk?” she explains.

5. Safeguard your legacy

Ultimately, building wealth for your children is a long-term process that operates more like a marathon than a sprint.

Using trusts and fiduciary services may help ensure your family’s wealth is preserved and passed on to the next generation, while also protecting your assets, personal estate and privacy.

Bhalla highlights the importance of families having proper insurance coverage. Medical, total and permanent disability, as well as critical illness policies are necessary to protect against low-probability yet catastrophic events that could derail your plans.

“Life insurance is particularly important while your family is dependent on you financially,” he says, noting that it is also an invaluable tool to equalize inheritance between sons and daughters alike.

This article contains excerpts from CNA. Read the original article here.

The material herein is for informational purposes only and is not directed at, nor intended for distribution to or use by, any person or entity in any country where such distribution or use would be contrary to law or regulation or which would subject Royal Bank of Canada or its subsidiaries or constituent business units (including RBC Wealth Management) to any licensing or registration requirement within such country.

This is not intended to be either a specific offer by any Royal Bank of Canada entity to sell or provide, or a specific invitation to apply for, any particular financial account, product or service. Royal Bank of Canada does not offer accounts, products or services in jurisdictions where it is not permitted to do so, and therefore the RBC Wealth Management business is not available in all countries or markets.

The information contained herein is general in nature and is not intended, and should not be construed, as professional advice or opinion provided to the user, nor as a recommendation of any particular approach. Nothing in this material constitutes legal, accounting or tax advice and you are advised to seek independent legal, tax and accounting advice prior to acting upon anything contained in this material. Interest rates, market conditions, tax and legal rules and other important factors which will be pertinent to your circumstances are subject to change. This material does not purport to be a complete statement of the approaches or steps that may be appropriate for the user, does not take into account the user’s specific investment objectives or risk tolerance and is not intended to be an invitation to effect a securities transaction or to otherwise participate in any investment service.

To the full extent permitted by law neither RBC Wealth Management nor any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this document or the information contained herein. No matter contained in this material may be reproduced or copied by any means without the prior consent of RBC Wealth Management. RBC Wealth Management is the global brand name to describe the wealth management business of the Royal Bank of Canada and its affiliates and branches, including, RBC Investment Services (Asia) Limited, Royal Bank of Canada, Hong Kong Branch, and the Royal Bank of Canada, Singapore Branch. Additional information available upon request.

Royal Bank of Canada is duly established under the Bank Act (Canada), which provides limited liability for shareholders.

® Registered trademark of Royal Bank of Canada. Used under license. RBC Wealth Management is a registered trademark of Royal Bank of Canada. Used under license. Copyright © Royal Bank of Canada 2024. All rights reserved.

Let’s connect

We want to talk about your financial future.

Related articles

Money management: Are you making these mistakes?

Financial literacy 4 minute read
- Money management: Are you making these mistakes?

Why your money mindset matters

Financial literacy 6 minute read
- Why your money mindset matters

Successful investing is like running a marathon not a sprint

Investing 4 minute read
- Successful investing is like running a marathon not a sprint