By Bryce Holdaway
Many of us are all-too-familiar with the egg and spoon balancing act of being a parent. At times, it can feel like we missed the memo and all the other mum and dads out there got the βThe Secret Formula to Parentingβ manual and we didnβt!
The truth is, while being a parent is one of the most rewarding and amazing things you can ever do in life, itβs equally just as hard to figure out if youβre on the right track to raising curious, kind and clever people whoβll grow up to be tomorrowβs contributing members of society.
Add to the mix that itβs our job as parents, not only to make sure our kids can hold a fork but also that theyβll be financial responsible when weβre not there to pick up the bill.
Where are parents going wrong?
At first glance, the most common reason we avoid teaching our kids money lessons β everything from the food on their plate to their beloved iPad was paid for with mum and dadβs money, which was made in exchange for mum and dadβs time β seems simple as so much of our energy is consumed in simply just keeping our kids alive and smiling!
But a quick lift of the bonnet reveals that the core of the problem has less to do with a desire to teach them and more to do with lack of confidence in our ability to manage money ourselves.
The fact is, we have record levels of household debt in Australia, including over $30 billion dollars in credit card debt, and the vast majority of us hard-working mums and dads will retire on less than we did when we received our first entry-level pay check.
In other words: todayβs parents, with easy access to credit and a new reliance on paying with plastic, have lost the ability to effectively manage their own money. Sadly, while most of us believe that having a βlittle bit left over each monthβ means weβre financially βokayβ, what weβre often doing is modelling an inferior pathway for our kids to follow.
How did we get to this point?
Thereβs no doubt about it: βKeeping up with the Jonesesβ is arguably harder than ever before. At no point in history have we had such a dependence on technology or had our private lives so visible to the outside world as we do today. With one click of a button, our electronic devices can simultaneously transfer invisible money from one invisible account to another through online banking, as well as upload our highlights reel so our friends and family can see, not just what weβre up to, but also how our βstatusβ stacks up.
Sure, this digital age has made our lives more connected and convenient, but it has also come at price. The cost? Every time we tap and go with no explanation, we teach our kids β who are looking up at as β that a plastic card is what buys us things.
Every time we tell the cashier to βPut it on credit, thanksβ we teach our kids β who are really good listeners when they want to be β that they can have whatever they want without first working for it.
And every time we try to βKeep up with the Jonesesβ, we teach our kids β who always pay more attention to what we do than what we say β to value materialistic possessions over true, holistic wealth. The real cost? Our kids are learning our bad money habits.
But thatβs only half of it. In the digital age theyβre growing up in, only 8% of all the money around the world is actually physical cash β the rest is digital money. Whyβs that significant? Well, unless theyβre exposed to physical money on a regular basis, our kids could miss the important lessons about the value of money itself, such as; What is it?; How does it work?; How do we earn it?; Why is it a limited resource?; Why do we make trade-offs with it?; and so on.
Add to the fact that they are a generation raised on immediate responses and short term gratification, and you gain a greater appreciation of the challenges of managing expectations.
What can we do to fix it?
The fact is most households donβt generate enough money to have it all. Education is key β and by education we mean our kids need to understand the context, trade-offs and consequences of our decision making surrounding money. Teaching kids the value of money also means us parents need to understand the difference between whatβs βour moneyβ and whatβs not; i.e. βdebt/creditβ.
We get that thereβs complexity to each householdsβ solution, but as parents, we can improve how we manage our own money and open up a transparent dialogue thatβs relevant to our kids, which they can comprehend and learn from.
Top 5 Tips to teach your kids about money
Lead by Example
Get your own finances in order by implementing a money management system, so you have a clearer picture and spend within your means
Teach them βstuffβ costs money
Let kids pay for things. If youβve got physical cash, help them count out the total and hand it over to the cashier. Explain whatβs happening when you use your debit card
Explain opportunity cost
βIf you buy that Lego kit, you wonβt have enough to buy the game console β the trade-offβ
Stress the importance of delayed gratification
Get them to save up for what they really want so they appreciate it more
Introduce them to compound interest when young
Teach your kids that money invested makes more money for you
Bryce Holdaway and Ben Kingsley are two of Australiaβs leading finance experts and educators who have most recently co-authored their second #1 Bestselling book,Β Make Money SimpleΒ Again, a no B.S. how-to-guide on their simple but effective 7-step family budgeting system. Β
Find out more atΒ www.tpc.moneysmarts.com.au