The earlier kids start with financial education, the better equipped they are to secure their future and to have the freedom to pursue their dreams.
With financial literacy arguably underrepresented in the national curriculum, parents are largely responsible for teaching their children the important financial concepts and life skills associated with managing money. So how are they doing?
Unfortunately, not very well it would seem.
A 2017 Financial Basics Foundation survey of 1,100 high students from around Australia found that teenagers financial confidence was much higher than their actual financial capability. The overall results suggesting that our kids are increasingly at risk of financial failure.
Formal education should not be relied upon solely to provide a complete understanding of financial literacy, parents do need to take their part in their children’s financial education seriously. Generally, the advice is to hand some financial responsibility over to your children: allow them to manage finances attributed to them, make them work at home for their ‘extras’ money, and encourage them to get a part time job while they are in school. All creating an invaluable experience.
One of the strongest voices on the importance of parents taking the lead on financial education is Scott Pape otherwise known as The Barefoot Investor. Scott urges parents to view pocket money/allowance as a tool for financial education, and not to give children money for nothing. The idea being they already get their food, board and education paid for so they should work for the extras to understand the nature and value of money.
Scott also promotes parents sharing their income and expenses with their kids, so they can develop an understanding of cash flow and the expenses involved in running a household and he believes that every graduate should have had the experience of holding down a part time job.
A useful tool for parents wanting to give their kids some responsibility and freedom to learn about managing money is Australian app, Spriggy. Children (aged 8-18) receive their own card which parents load money onto, and both parents and kids can track their spending as they go. The card allows children to make purchases wherever Visa is accepted, meaning they are exposed to consumer traps in the market. As parents have total transparency, they can reinforce important lessons as they occur. The app also encourages savings with built in goals for kids to work towards.
And finally, enlist the support of your kid’s school - arrange to meet with the curriculum coordinator and make your case for including financial literacy as a learning area. There are some great tools available - MoneySmart/Banqer/Earn & Learn - to assist teachers and engage students.
By educating kids on important financial concepts, they can leave school with the confidence to manage their personal finances and the capability to make good financial decisions for their future.