While school teaches children many valuable lessons, it’s becoming apparent that not nearly enough time is dedicated to teaching our kids about money. Think about the last time you heard a child come home from school saying “today I learnt how to read a bank statement”. Probably never.
However, these skills are of utmost importance, especially in an era where increasing technology is making money more accessible to kids at a younger age.
It’s a different world today. Goods are being bought and sold without any physical money changing hands. Between credit cards (especially PayPass functionality), PayPal, BPAY and internet banking – it can be quite difficult for kids to learn about and appreciate money when it appears almost invisible.
The facts below1 demonstrate the reality of the situation:
- 54% of Australians aged between 15 and 74 have numeracy skills below or at level 2 (where level 1 is the lowest and level 5 is the highest)
- 36% of young people with credit cards, don’t usually pay off the full balance every month
- The average amount owed is $2,477
- 28% of teens aged 14 to 17 have bought or sold goods online
- 94% of teens aged 16 to 17 own a mobile phone – where a purchase is just a tap away
The truth is, financial literacy is a universal language we all need to understand to survive. How kids learn about money today will significantly impact their future and the type of lifestyle they can have.
It is a responsibility that lies on the shoulders of parents. Consider if you feel confident to teach your children the best skills. Do you have the expertise to try?
Here are a few simple ways you can start educating your kids about money (start as early as you can)
Allocate responsibilities so they can earn their pocket money
- Set small (age appropriate) tasks around the house such as helping with the cleaning up or putting out the bins once a week. When they fulfil their responsibilities they receive their pocket money.
- If your child asks for something, discuss ways they could save up pocket money to buy the item themselves. Help calculate how much they will need to set aside, for how long, to reach their target.
- Open a bank account for each child and take them to the bank where they can make their own deposits. This way they will feel responsible for their own savings.
Demonstrate how to budget
- Share some of the family’s bills and bank statements and explain how to read and interpret these.
- In the supermarket, give your child a small amount of money with parameters around what you need them to buy. This will teach your child to evaluate and make choices with limited funds available.
Encourage a part time job (when an appropriate age)
- A casual job can teach kids the value of money and will help them realise that money isn’t free flowing (like it may seem coming out of mum and dad’s wallets).
- Encourage your child to draw up a budget and set aside a portion of their pay to a savings account.
- Provide assistance in setting realistic short and long term goals and support them in sticking to these.
These simple tips are a great way to start educating your kids about money. However, there may come a time when even you can’t answer all your child’s questions. It can be extremely beneficial to seek the advice of a Financial Adviser who can help you set your child on the right track to an educated and secure financial future. Learning these crucial skills from a young age can make a significant positive impact on their life, beginning when they are still living at home as dependents (the perfect time for saving), all the way to their retirement.
We all want the best possible future for our kids. Contact a Financial Adviser today and give your children every opportunity to succeed.
1 "Money makes the world go around" video, MoneySmart website
Source: Capstone Financial Planning