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Teach your kids about money

11 August 2021

Financial

Posted on: 11 August 2021

Help the young people in your life get to grips with their finances with these expert tips.

85% of young adults aged 16-25 wish they’d been taught about money management at school; you may look back on your own schooldays and wish the same thing.[1] As a parent you can help by sharing lessons you’ve learned and helping kids form good habits.

1. Talk to them

Avoid secrecy and shame around money. Talking to kids about your experiences will give them a head start in learning about money management. Be honest – we’ve all made mistakes in the past and being upfront about potential pitfalls will help your kids avoid getting into debt or making poor choices.

You don’t have to sit down and give them a five-hour lecture. Just introduce the subject from time to time when the moment feels right. Once they realize you’re open to these discussions, they may be more comfortable coming to you with money questions.

They may even ask questions you can’t answer – that’s fine! Admit you don’t have all the answers and do the research together.

2. Budgeting is key

It’s boring but true – learning how to balance a budget is a key life skill. Kids don’t have to worry about paying the gas bill, but they can plan how they want to spend their pocket money or income from part-time jobs. Check out our article Budgeting for beginners for advice.

3. Use technology to your advantage

There are a number of apps which you and your family may find useful:

  • Money Dashboard – gives a visual overview of your bank accounts, credit cards, savings, loans etc so you can see where your money is going.
  • Plum – uses AI to analyse your spending and put aside savings without you even noticing.
  • Cleo – squarely aimed at Gen Z, this is an AI-powered money management bot with a sarky attitude.
  • Banking apps – many have fantastic functionality eg. Monzo allows you to separate your money into different pots, set personalised budget limits, do automated savings challenges and more.

4. It’s never too early to save

Whether for short-term goals, like holidays, or long-term dreams, such as buying a home, good habits start now. Everyone needs to find a solution that allows them to live comfortably today, while making progress towards tomorrow.

Make sure your kids know how to save up and the importance of having a ‘rainy day fund’ to fall back on. For more advice, check out our article on future-proofing your finances.

5. Learning the difference between ‘good’ and ‘bad’ debt

Be clear with your kids about when it’s ok to borrow money and when it’s not. A good debt represents a sensible investment in your financial future: it should leave you better off in the long run. Bad debt is anything that is unaffordable, which is why student loans aren’t comparable to a high-interest payday loan.

When it comes to credit cards, they can be useful to help build credit score (which helps with getting a mortgage later in life), but must only be used for essentials, and the balance should be paid off in full every month.

6. Save the student

If your child is going to university, you both need to understand how student finances work. How much will they need to borrow in tuition and maintenance loans and how will it be paid back once they’ve graduated?

It’s also probably going to be the first time they’ve had total responsibility for household expenses. Check that they know how to manage a budget, pay bills and shop around for the best deal.

When they graduate, their priority should be reducing their overdraft. As a student you get an interest free overdraft but that will end within a few years and be converted to an ordinary overdraft with high charges.

Money makes the world go round, so we’ve all got to learn about it at some point. Financial wellbeing is a life skill – you’re teaching them to manage their money more effectively, so they can make the most of their earnings and money is no longer a source of stress.

 

[1] The Money Advice Service, Young Adults and Money Management: Behaviours, attitudes and useful rules of thumb, November 2017. Accessed at https://www.financialcapability.gov.au/files/young-adults-and-money-management-behaviours-attitudes-and-useful-rules-of-thumb.pdf

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