Financial literacy for kids (and adults) - Women's Agenda

Financial literacy for kids (and adults)

When we leave school, we are full of knowledge – so full sometimes we think we know it all. But there is one critical skill that isn’t taught at school: financial literacy.

We go out into the big wide world and are expected to be fiscally responsible adults with jobs who can manage our own money, but it’s just not that simple.

Certainly a majority of us haven’t had the training required to truly understand the banking system, savings, compound interest and what it takes to make our money work and last longer.  In a 2015 survey conducted by ASIC, one in six respondents said they agreed with the statement ‘I have difficulty understanding financial matters’. And, those under age 35 were more likely to ‘buy things on impulse’ and ‘financially live for today’.

I’d love to be able to talk to my teenage self and say ‘listen to your parents – they know what they’re talking about’, but we all know that in reality nothing gets through to a teenager who has just received their first pay packet. This is why financial education needs to start much earlier, with our toddlers and primary school children as well as our teens – and the buck starts (and perhaps even stops) with parents.

While financial education classes in our schools have been talked about by various government bodies for years, the implementation of the practice hasn’t yet been made mandatory. We therefore see other players capitalising on this opportunity, with the Commonwealth Bank recently announcing a $50 million boost into school-based financial literacy programs.

It is concerning that Commonwealth Bank CEO Ian Naraev refers to young Dollarmite account holders as “customers”, this implies they they’re already counting them as part of their client base, a group they can market to and profit from. This is no more evident than the 18th birthday present that many Dollarmite account holders receive from the bank: a pre-populated credit card application.

But without this further increase to financial education for our children, are we just setting them up for failure? Should we allow the Commonwealth Bank to assist our kids to better understand how to manage their finances?

Whatever the answer, it all comes down to education. With knowledge comes power, and while they may have a Dollarmite account now to build their cents into dollars, they also need the knowledge to manage their cash flow now and into the future, as well as the education to understand that the big banks profit from their products.

  • Give your kids a moneybox (that cannot be opened) and allow them to put their money in it. Most little ones won’t understand the idea of the value of their bank balance increasing by reviewing their monthly statements, but they can certainly feel when their moneybox gets a little heavier.
  • Get them to save half of everything they receive. This includes birthday and Christmas money or even pocket money. Ensuring they understand that you need money now as well as saving for the future. 
  • Sometimes, say ‘no’ and explain why. Let them understand the concept of not having enough money to pay for an item and let them know you will put a little away each week for them and when enough money has been saved then you can buy it. Give it a couple of weeks so that kids understand that saving is a slow process.
  • You could also produce a savings chart – similar to a rewards chart so they can see as they put money in their account/savings they get a star and when they reach 10 stars they get to buy the toy they wanted.
  • Let kids make mistakes. Frivolous spending can be a great educational tool to show that unnecessary spending now means that you miss out on the bigger better items later.
  • Have your own financial affairs in order. How can you teach others when you don’t know how to do it yourself? Get yourself educated. www.yourbestinterests.com.au is a good resource website that can help without the obligation of engaging a financial planner.

 

  • Explain the traps of banking and borrowing. You could even allow your children to borrow money from you with interest and regular repayments. Have a contract with consequences if they don’t make the required repayments.
  • Explain the banking system in our country – don’t leave it to a big bank to do it for you. Explain fees and charges and what you can do to reduce your banking costs. Talk about building societies and other banking institutions so they can make an informed decision about their money management.
  • Have them get a job. Understanding the value of money is difficult without knowing how hard you have to work to earn it.
  • Make them save half. This is a great rule of thumb for anyone regardless of age. While they are young, they have little or no financial responsibilities and saving half will ensure that they are on the right path and ahead of the pack when it comes to buying their first car.
  • As they get older and finish school, consider the idea of charging board. This gives value to the costs that it takes to live daily life as up until now, kids have only had to worry about one-off purchases. You don’t have to use it, you could even save this for their future and hand it back to help with the house purchase or wedding costs. 

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