By Jo and Carl Violeta
As parents, we want to do everything we can to guide our children towards becoming happy and fulfilled adults. Financial literacy and sound money management skills are two of the greatest gifts we can give our kids.
Worryingly, recent research shows that over 40% of Australians report their financial knowledge as being low to very low. Almost 1 in 3 Australians report having no savings at all. Collectively, as a nation, we owe over $30 billion in credit card debt.
Focusing on financial literacy at home can help kids learn how to save money, make smart financial decisions and grow into financially savvy adults. By following a few simple, practical strategies teaching kids about money can actually be fun and easy (we promise).
Talk about money at home
To build kids financial literacy, make money and finances a regular topic of conversation in your home.
Conversations about money can become more detailed and sophisticated as children get older.
The way you talk about money to and in front of your kids should be realistic and positive to help them develop a healthy money mindset.
Peninsula based Psychologist Rebecca Underwood advises that it’s also important to role-model healthy money habits. “By modelling constructive behaviours and healthy spending habits, we create a solid foundation from which our children can learn through simple observation. From here, we are able to help our children learn to guide their own behaviours. The old adage ‘Monkey see Monkey do!’ comes to mind” said Ms. Underwood.
It’s one thing to tell kids to save, plan and spend wisely, but these messages will be meaningless if they are not supported by action. If parents are racking up huge credit card debts when doing the Christmas shopping or have no savings, their kids are likely to follow a similar pattern of behaviour.
When kids see their parents living within their means and consistently saving they are likely to follow their parent’s lead and build healthy money habits.
Use pocket money as an educational tool
Pocket money can be an effective tool to teach kids about managing money.
When we started giving our daughter pocket money, we sat down at our kitchen table and created a plan to ensure that it provided her with valuable money lessons.
Encouraging kids to save their pocket money for special purchases, teaches them how to wait for what they want.
“In a world where almost everything appears to be about immediate gratification with most things available at our fingertips (think social media, internet, online or extended hours shopping), having the ability to sit with the discomfort that comes with delaying that gratification (not getting what you want when you want it) is a critical yet overlooked skill that all children can benefit from, “said Ms Underwood.
It’s also a great idea to allow kids to decide whether they save or spend their pocket money. This provides them with safe opportunities to learn how to make financial decisions.
Saving and spending their own money helps kids to appreciate the value of money and the relative price of things.
We recommend parents approach pocket money with a focus on education and finding teachable moments.
Get kids involved
As well as talking to kids about money, give them opportunities to make money decisions with you:
- Ask them to help you compare health insurance policies, utility providers, and banking products.
- Let older kids plan the family’s meals for one week. Set a budget, get them to write the shopping list and purchase the groceries.
- Involve them in planning the next family holiday, including how much will need to be saved and creating a savings plan
Teaching kids how to be smart with their money doesn’t need to be complicated, it just requires consistency and some conscious planning. Talk to your children about money, role-model healthy money behaviour, give them plenty of opportunities to practice their money management skills, and they will be well on their way to becoming financially savvy adults.
Jo and Carl Violeta are self-confessed numbers nerds, parents of an energetic toddler and a super switched-on teenager, and co-founders of the award-winning business, Violeta Finance.
They are a husband and wife team who are passionate about empowering their community with financial education, love the odd glass of wine, and get a kick out of helping families achieve their homeownership and financial dreams.