If there is one lesson we can pass on to the next generation in light of the unprecedented financial and economic circumstances we have navigated over the last few years, it would be how to be responsible with their money.
Here are ways to help kids become financially responsible and budgeting tips to offer your young adult in their first job.
Discuss the reality of budgets and finance early
We won’t say ‘it’s never too early,’ but helping children understand the concept of money at opportune moments in their lives is a good thing.
Children want stuff.
Help them discern between needs and wants. A new pair of shoes when the old ones are too small is a need. The latest popular shoe trend from international sporting superstars that today’s teenagers try not to ‘crease’ and cost the same as a week’s mortgage payment or rent is a want.
Discuss how the family has money to spend. Explain how work earns money and we need money to live.
As children get older, you can help unpack these monthly costs by sharing monthly expense budgets to help them understand the reality of how their lifestyles are maintained by a budget.
It may also be helpful to teach children of high school age the relationship between inflation and interest rates and how this affects budgets, savings and expenses.
Teach children to save
Like we said, children want stuff. Saving is a long-term strategy, so the most important thing to learn in this life lesson is to work hard and be patient.
A great way to get them to start saving is encouraging them to do chores around the house, garden or neighbourhood for a little pocket money.
There are a myriad of saving apps for kids out there that offer children financial independence. Here are some of our top picks:
Spriggy: This app is great as it not only empowers kids to take responsibility for the chores they have done, but the app sends a personalised debit card for kids to use at their favourite store. A parent has control of the dashboard, so you can move money from a savings account into the card and control the payment amount for each chore.
Kit: Commbank has built a kids’ pocket money app called Kit, which is especially appealing to younger kids as the graphics are bright and colourful. Kit enables kids to fully customise their profile and their chores. The app also offers a kids’ card and has a great interactive kid-zone to help educate kids on money and saving.
Hyperjar: the unique thing about the Hyperjar app is that is allows you to set up specific ‘jars’ to allocate savings to. These can be anything from expensive sports equipment or apparel to entertainment and travel. A single dashboard manages the Jars and a parent allocates money from each jar onto a card that kids can use.
Putting these savings towards the sharemarket is also a way to help them save for their own nest egg that they can later take responsibility for and grow with.
Get children to help with the shopping
This CAN (we say that cautiously) be a fun exercise for children. When doing your weekly shop, tell them to look for the best value item from a specific product category.
You can do this by helping them identify the different brands and the cost difference between them.
You can also help them work out the best value by looking at discounts or special offers. Help them identify the best value by looking at the cost per 100ml/mg etc, instead of the total price, as product volumes may vary.
Budget tips to offer your young adult in their first job
It’s exciting to start earning your own ‘real money’ when landing your first job. It’s also tempting to spend that money.
At Step Up, we have adopted our own version of the 50/30/20 budgeting principle to effectively allocate a monthly budget.
The rule suggests the split be 50% towards obligatory monthly expenses like your rent or mortgage repayments and utility bills, 30% to wants and entertainment and 20% toward debt repayments and savings, but we suggest a slightly different split.
We suggest using 50% of your after-tax earnings as the 50-30-20 principle suggests but shifting the 30% and 20% split slightly to increase your savings. This is a great way to help young adults save to get on the property ladder or consider investment options too.
Send them a link to our 2023 budget bible for more budgeting help to adopt as soon as that first paycheque lands in their bank account. It would also be helpful to suggest they work with a financial planner who is committed to helping them achieve their financial budgeting goals.
Contact us to make an appointment.