By Jade Glen
A while ago my three-year-old daughter, Lucy, decided that the day’s activities should include a plane ride to another country.
I explained that we didn’t really have the time or money to do that, on our average Thursday. While the lack of time was of no real concern to her, she had an easy solution to the lack of funds.
Just go to the ATM and get some money out, mum – duh! (Well, the duh may have been ad-libbed by me, but she definitely gave me an incredulous look as if she couldn’t believe I hadn’t already thought of this)
It got me thinking about how I could teach my kids about money, and how I could explain that the cash spat from teller machines and the plastic swiped at the supermarket checkout was not an infinite resource.
You start teaching your child from the day they are born – how to use a spoon, a toilet, ride a bike, drive a car. But how do you teach them about money?
I don’t expect to start by explaining Superannuation or Investment Bonds. To be honest, I’m still waiting for someone to explain them to me. But discussions about money should start at an early age, says Laura Higgins, Senior Executive Leader at ASIC’s MoneySmart.
“It’s never too early to talk to your children about money and about making choices around spending, saving, budgeting and goal setting,” she said.
“Parents should take advantage of opportunities to have these conversations in everyday real life situations. For example, at the ATM you can talk about where money comes from. A visit to the supermarket presents a number of learning opportunities, for example, talking about how items are priced and how buying in bulk and selecting generic versus brand products may save money. Parents can also use this experience to discuss the influence of marketing and product placement on spending choices.
“At home, parents can involve their kids in discussions on the family budget to help them understand the costs of family life and how much money is spent on needs versus wants and how money might be allocated for holidays or special occasions such as birthdays.”
Ms Higgins said young people were exposed to money and finances from a young age, from receiving pocket money to engaging with financial products like bank accounts and mobile phone contracts.
“It’s important for them to develop the financial skills and knowledge to make informed choices about money throughout their life.
“As adults they’ll be faced with decisions about complex financial products and services, including superannuation, home loans and insurance. Making a poor financial decision, for example, running up too much debt on a credit card or not insuring a car properly, can have a huge impact on a young person. Ensuring they understand financial concepts, such as budgeting, saving and managing debt will help them make informed decisions.”
Ms Higgins said pocket money was one way for kids to begin to understand money’s value and the concept of earning money.
“Earning pocket money for jobs around the home, or outside the home, can help kids with making money decisions, including choosing to spend their money now or saving it for something more significant later,” she said.
For teenagers, starting a part-time job is an important money milestone. Ms Higgins recommended parents sit down and help their children understand their payslip, to make sure they were being paid the correct amount and to discuss superannuation and tax.
“Having a part-time job can be a great way for teenagers to develop new skills around money, including working out how to save, when to spend and how to budget. It’s possible with their first job they’ll turn to their parents for guidance around managing their money. This presents parents with an opportunity to explain the value of saving versus spending and may help them set and achieve financial goals’, said Ms Higgins.
“Establishing a savings plan is a great place to start. You can use ASIC’s MoneySmart savings goals calculator to work out the steps needed to put a plan into action and figure out the amount of money they might need to save for something specific.
“It’s important they have an understanding of these concepts to help them make informed decisions. For example, being aware that having one super fund means you’ll avoid paying multiple fees and if you have more than one fund you should consider consolidating the funds.”
Next time my daughter casually asks for an international jaunt, I will try and explain the cost in terms she can understand. Flights for our family of four will cost her roughly 2,181 kinder surprise eggs.
For more money smart tips, and to access the savings goals calculator, budget planner and other free resources, visit moneysmart.gov.au
