In 2002, Scouts Canada launched a new scouting badge that focuses on investing. While the program was short lived, we salute this program for its assistance in reaching our youth and helping them to become more financially literate. Even if your children are not in Scouts, we believe these are good exercises to help your child or grandchild, gain a better insight into the world of finance. Children achieve financial maturity at different ages, but like anything else, experience goes a long way to building maturity. Review the following with your children and if you would like any assistance, feel free to give me a call.

The original criteria for earning this badge were the following:

  Invest $1,000 of pretend money and chart the price movement over a period of time.
  Scan the Internet for investment sites for kids.
  Interview an investment professional regarding educational requirements and client relations.
  Describe how compound interest works and explain "the rule of 72".
  We've added an extra investing quiz just for fun.

The two best ways that come to mind for this task is a) pen and papers – by picking and following a stock in the news paper; and b) using an on-line investment tracking site. These independent web-sites will allow you to create your own account, purchase a stock or mutual fund and visit it daily to see new trading prices.

We’ll leave the exact process for using these on-line sites to you and your children to figure out. If you already use an on-line account, then you know all you need to guide your child through creating their own account. If this is all new to you, then we’d suggest visiting www.globeinvestor.com. As you can see, we're trying hard to leave the work to your children to help them learn from this experience.

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All we can say here is utilize your favourite search engine for this one. Kids today know their way around the internet better then any of us. If you’d like a head start, you can look at our "links" tab for a few places to start.

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We're available! We'dsuggest having your child give your advisor a call, and they can answer questions over the phone. If you’d like to arrange an appointment to meet in person, They’d be happy to meet with any child who is accompanied by an adult. We imagine a time right after school would be convenient for all involved.

The advisor team at our office can be reached at (519) 518-2025 between 9am and 5pm. You can also e-mail us at: info@LegacyPartners.ca

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The rule of 72 is a quick and accurate way of illustrating compounding. This rule states that if you divide a given rate of return into 72, you will get the number of years it will take a sum of money to double. For example: At 8%, you’ll find that your money will double in 9 years by performing the calculation: 72 divided by 8. Therefore, $10,000 grows to $20,000 in 9 years and then doubles again to $40,000 in the next 9 years. That’s $30,000 of growth in 18 years. So knowing this, take a stab at answering the following question.

Given the ability to catch up on your Registered Retirement Savings Plan (RRSP) contributions, a 29-year-old decides to borrow $32,000 and invest this into an RRSP. Assuming a 10% rate of return on this investment (and ignoring any borrowing charges), what will this investment grow to by a retirement age of 65? (Hint: The bare naked ladies wrote a song about this a few years ago.)

For bonus marks, what is the total lost growth if this person waits until age 36 to make a $32,000 RRSP catch-up contribution? Given this knowledge of compounding we think you’ll agree that the sooner you can invest, the more powerful the rule of 72 will be.

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If you have tackled the above items, you should be ready for a little test. Give this a try… with out looking at the answer. :-)

Here goes: Joseph and Rose are discussing investments when Joseph proudly proclaims that while his $1,000 investment from two years ago lost 40% last year, he’s still doing great because of his 80% gain in the first year. Rose, with a little smile replies, well I’ve got you beat. My $1,000 investment has return 4% each of the last two years. Do you know whose savings account holds the highest balance after these past 2 years of investing?

   Here’s the answer:

Rose earned a consistent return and surpassed Joseph’s investment. While Rose won this "race," this example gives absolutely no indication as to who will win the next race. Please keep in mind that retirement planning is not a race, but more like a marathon. If you are comfortable with the volatility in Joseph’s portfolio, this style of investment may be well suited for you. The only way to know what style suits you best is to have a personalized financial plan created for you.

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