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 โThe Secret Formula to Parentingโ manual and we didnโt!
The truth is, while being a parent is one of the most rewarding and amazing things you can ever do in life, itโs equally just as hard to figure out if youโre on the right track to raising curious, kind and clever people whoโll grow up to be tomorrowโs contributing members of society.
Add to the mix that itโs our job as parents, not only to make sure our kids can hold a fork but also that theyโll be financial responsible when weโre 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 โ everything from the food on their plate to their beloved iPad was paid for with mum and dadโs money, which was made in exchange for mum and dadโs time โ 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: todayโs 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 โlittle bit left over each monthโ means weโre financially โokayโ, what weโre often doing is modelling an inferior pathway for our kids to follow.
How did we get to this point?
Thereโs no doubt about it: โKeeping up with the Jonesesโ 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 weโre up to, but also how our โstatusโ 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 โ who are looking up at as โ that a plastic card is what buys us things.
Every time we tell the cashier to โPut it on credit, thanksโ we teach our kids โ who are really good listeners when they want to be โ that they can have whatever they want without first working for it.
And every time we try to โKeep up with the Jonesesโ, we teach our kids โ who always pay more attention to what we do than what we say โ to value materialistic possessions over true, holistic wealth. The real cost? Our kids are learning our bad money habits.
But thatโs only half of it. In the digital age theyโre growing up in, only 8% of all the money around the world is actually physical cash โ the rest is digital money. Whyโs that significant? Well, unless theyโre 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 donโt generate enough money to have it all. Education is key โ 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 whatโs โour moneyโ and whatโs not; i.e. โdebt/creditโ.
We get that thereโs complexity to each householdsโ solution, but as parents, we can improve how we manage our own money and open up a transparent dialogue thatโs 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 โstuffโ costs money
Let kids pay for things. If youโve got physical cash, help them count out the total and hand it over to the cashier. Explain whatโs happening when you use your debit card
Explain opportunity cost
โIf you buy that Lego kit, you wonโt have enough to buy the game console โ the trade-offโ
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 Australiaโs leading finance experts and educators who have most recently co-authored their second #1 Bestselling book,ย Make Money Simpleย Again, a no B.S. how-to-guide on their simple but effective 7-step family budgeting system. ย
Find out more atย www.tpc.moneysmarts.com.au