Spending these days is frictionless and invisible, making budgeting much harder for teens.Illustration by The Globe and Mail/Getty Images
Shannon Lee Simmons is a certified financial planner, founder of The New School of Finance, and author of Making Bank: Money Skills for Real Life.
As a financial adviser, I spend most of my time helping clients prepare for retirement. But over the past five years, there’s been another topic cropping up with surprising frequency in my inbox: Parents are worried about their teens and money. Specifically, they’re concerned about how easily their tweens and teens are racking up charges on family credit cards – not maliciously, but mindlessly.
One parent told me her teenage daughter accidentally spent $200 in a single sitting on makeup while logged into her mom’s account. She wasn’t trying to overspend, it just sort of … happened. Click, click, click. Another parent shared that their son spent hundreds on Robux (a currency used in the digital game Roblox) without realizing that the digital tokens in the game cost actual money in the real world. And just recently, a mother told me that her 8-year-old son flat-out refused to accept his allowance in coins because, as he put it, that’s not real money.
What’s happening here isn’t carelessness. It’s a growing disconnect between kids and the concept of money. When I was young, I’d go to the bank teller with my parents, watch them get handed $100 in cash, and then see them hand a $20 bill to the pizza guy. I could physically see that there was less money in their wallets when they spent it. It was concrete.
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This generation is the first to grow up with parents using tap technology and digital wallets. Money is a number on a screen. A tap here, a swipe there; spending is frictionless and invisible. The allowance that once lived in a mason jar, a piggy bank or sock drawer now arrives as an e-transfer or prepaid card. Every day, I work with adults who find it hard to budget using tap technology – imagine trying to do so with a teenaged brain.
Over the past two years, while writing a personal finance book for teens, I’ve met with young Canadians to teach them about money. I know parents are worried about their kids’ financial literacy, but I also learned that teens are worried about this, too.
Turning 18 shouldn’t mean financial ambush, but it’s becoming that way in Canada. Financial anxiety is an increasingly common feeling for Gen Z, and it’s not hard to see why: Gen Z’s credit use surged by over 30 per cent in the past year alone, driven largely by access to credit cards and personal loans without enough financial education around budgeting, saving and investing.
When youth become of age in Canada, they enter the high-stakes world of personal finance with no training. It’s like being handed the keys to a Ferrari with only a learner’s permit.Illustration by The Globe and Mail/Getty Images
The financial environment teens find themselves in today is highly likely to be the culprit. When teens reach the age of majority in their province, they can immediately apply for tap-friendly credit cards, opening them up to the world of personal investment apps where one can buy or sell stocks and cryptocurrencies on a whim. I once spoke to a 14-year-old boy who couldn’t wait to turn 18 so he could start day trading and, as he put it, double his money. A recent study found that 79 per cent of Gen Z Canadians begin investing before the age of 21, and the primary motivating factor for 40 per cent of them is FOMO – the fear of missing out. Young Canadians are also increasingly exposed to investing content on social-media platforms such as TikTok and Reddit, which can glamourize risky strategies.
With their phones, young people can impulse-spend and even gamble on sports-betting apps from the couch while watching a show. We expect them to move on from their parents’ care and navigate the high-stakes world of personal finance responsibly, while giving them minimal real-world practice in doing so. It’s like being handed the keys to a Ferrari with only a learner’s permit.
Financial literacy isn’t just about knowing what compound interest is or how to budget – it’s also about practising the crucial life skills of tracking, saving and growing your money in real time. But opportunities to earn, save and spend are shrinking for today’s youth. As of May this year, youth unemployment in Canada hit 20.1 per cent, the highest level since 2009, according to Statistics Canada. Teens reaching the age of majority today are facing a stark financial climate of job-market instability, economic uncertainty, and the skyrocketing cost of living. The content they consume on social media also tends to ratchet up the pressure to spend money. Without reliable incomes, combined with the rising cost of living, young people are using credit cards to make ends meet with no experience in how to budget to pay it down.
We have the opportunity and responsibility to help our teens navigate this new financial world by giving them a chance to practise fundamental financial literacy before they reach the age of majority. It should be our imperative to do so, given the potential message of the upcoming federal budget – at a university talk in late October, Prime Minister Mark Carney spoke of “sacrifices” that Canadians may need to make in the coming years. While our young people can’t control what those sacrifices may be at the federal level, we can better prepare them to control their own financial futures.
Canada doesn’t have a national curriculum and not every province builds financial literacy into lesson plans. The depth and consistency of financial education varies widely from province to province, and even school to school or teacher to teacher.
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If we want better outcomes for the next cohort of teens in this country, we have to start teaching kids about money differently and earlier. We cannot continue to teach finances the same way Gen X or even millennials learned. We have to create safe, meaningful ways for teens to use and practise the skills they need to navigate this new financial world on their lunch breaks, after school at the mall and during online-shopping sessions before they enter adulthood.
Through co-ordinated efforts at home, in schools, through supportive policies, and within financial institutions, we can better equip the next generation.
On the home front, parents need to help their teens find their motivation for saving money. Does your teen want to buy something expensive, say an $80 face primer at Sephora or a $200 pair of sneakers? See it as an opportunity to motivate them to save up. Help them set a goal they genuinely care about to start the habit of saving. Most teens don’t get excited about saving for postsecondary education or a future down payment, but they do get excited about saving for concert tickets and video games. I hear a lot of parents shaming their kids for these kinds of expenses. But instead of trying to teach them that the expensive thing they want is frivolous, harness their excitement – get them to save up!
Parents can leverage the power of an allowance. If your teen isn’t able to get a traditional part-time job or earn money with a side hustle, offer a consistent allowance tied to chores if your budget allows, even if it’s small. A consistent income tied to chores mimics a paycheque and turns budgeting from theory into practice.
Policy makers have a role to play, too – because practice requires opportunity. Summer jobs and part-time jobs for teens are hard to find. Teens aren’t just competing with each other any more, they’re competing with AI and a weak labour market. We need more bold, targeted support to expand programs like Canada Summer Jobs, and offer wage-sharing incentives for businesses hiring youth. Summer jobs aren’t just a rite of passage, they’re a financial training ground.
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Programs like those run by the Canadian Foundation for Economic Education, and the University of Waterloo’s Financial Literacy in the Classroom resource for high-school teachers, are examples of initiatives that aim to provide every Canadian youth with needed skills. These efforts deserve more than applause – they deserve support. Let’s continue to work toward mandatory, co-ordinated financial literacy programming, integrated into subjects like mathematics, humanities and social sciences to ensure students build money skills progressively from a young age.
Many Canadian banks already offer youth chequing accounts with digital-wallet capabilities, or helpful money management apps. Some even offer high-interest savings accounts for young people. But let’s go further. One of the biggest complaints I hear from youth is that they can’t easily have multiple bank accounts at most financial institutions. It’s difficult to digitally move money from a chequing account, where they budget and spend money, to a savings account where they build up their finances toward a goal. Like adults, teens also need multiple types of accounts so they can mimic the budgeting and savings skills required for a digital adulthood.
If we want the next generation to thrive financially, we can’t keep crossing our fingers. Limited job opportunities, the gig economy, a lack of cohesive financial literacy programs, and bank accounts that do not mimic real life will not set our youth up for success. Our new economic reality means that financial stakes are higher than ever, while financial mistakes made in early adulthood become harder than ever to recover from. If we want young people to succeed financially, we have to give them the opportunities to build and practise this essential life skill before the consequences are real.
