What is 'financial literacy’ anyway?
Simply put, it’s just a fancy name for being able to make more informed decisions when it comes to money. Although some of us might not have mastered financial literacy just yet, we can certainly try and give our kids a head start, so they can build good habits and avoid overspending on smashed avo toast and barista coffees like the rest of us.
How do you teach kids about money when (almost) no one uses cash anymore?
Don’t worry, you can still give pocket money. Physical cash hasn’t disappeared completely, and a tangible amount can sometimes make it easier for kids to grasp.
But if the trusty piggy bank is no longer ‘cool’ in your house, you can consider paying pocket money digitally. When you send funds directly to your kid’s bank account it gives you the opportunity to teach them about money and technology simultaneously.
Set some time aside regularly to talk to them about their account, where the money goes, how it’s stored, and how they can access it. Look at how they’ve spent it and ask them if they still feel happy with their purchases. Keeping the conversation relatable and relevant will make them more likely to enjoy learning about money and (hopefully) mean they won’t need to bury their head in the sand later in life.
You might choose to give a standard monthly allowance or maybe you will set chores to be completed in exchange for pocket money – whatever road you decide, the golden rule is to teach kids how to save and spend responsibly. Give them ideas on what they might want to spend money on and how exciting it can be to save in order to achieve it.
Needs vs wants
No matter the child’s age you can talk about the value of need vs want (e.g. new running shoes or the latest LEGO® set). Encouraging your kids to wait a certain amount of time before making a purchase can also help them avoid impulse spending.
Getting those deals
Even when your kids are still young enough to fit in the shopping trolley, you can involve them in your shopping process. Chat to them about products you need to buy, ask them to help you compare prices or deals, have fun counting how many products you’re buying, and guessing how much it might cost. Children love to be involved and can learn a lot from your discussions and actions.
You don't really see a utility bill until you have to start paying them yourself, and at that point, it can be pretty daunting! Consider engaging ways to get your kids involved (so they can see that WIFI actually costs money) by showing them your incoming bills and making fun activities from it. One way to teach them is by getting them to work out how many hours you might need to work in order to pay the bills.
Woo hoo! My teenager has their first job – now what?
A first job is a great time to help your kids understand the basics of how the economy works by talking about pay rates, taxes, and superannuation. And it’s also the perfect opportunity to begin talking about what they want to do with their hard-earned money. Do they have short or long-term purchase goals? Perhaps you can ask them to cover the costs of some items such as their mobile phone or their weekend activities. Whatever method works best for you and your family – it’s a key time to start discussions and allow your kids to begin their own money journey with your guidance and support.
Want some more help? Moneysmart is another great resource to help you teach your kids about money.
Disclaimer: This article is intended as general information only and has been prepared without taking into account the personal financial situation, objectives or needs of the reader. Before acting on this information, you should consider its appropriateness, having regard to your objectives, financial situation and needs.