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By Julie Nipperess
Just the other day I was talking to a friend and his wife who recently returned from a family trip to Canberra with their four children aged between 7 and 13.
My friend told me that his kids were totally “underwhelmed” when he took them to the Australian Mint.
“This is where they make all the money,” he explained to four blank stares.
It’s a lament I hear often from parents – how their children are disinterested in, and disassociated with money.
“Yes, it’s a different generation all right,” we collectively sigh.
But the truth is, we’re all getting more and more disconnected from money. Technology enables us to pop pins and swipe cards and even make purchases from our smartphones if we’re hooked up to the right app.
These days, paying bills and buying stuff certainly feels a lot less like parting with hard-earned cash than it used to.
When families come to me, committed to securing their financial future, I’m always keen to ensure they pull the team together. And by that, I mean that couples need to get on the same page, and if there are children, then they do too, once they are old enough. Because it doesn’t take much for your savings plan to be completely derailed if you’re not all committed to the same goals.
So just how do you get the kids interested in saving when there’s so much tempting stuff to buy? And so many ways to buy it?
You go back to basics.
With real money.
It will be awhile before the cryptocurrencies rule the world. Kids need to learn the same way we did, with pocket money, a savings jar or bank account and some simple adding and subtracting.
In his book “The Barefoot Investor for Families,” Scott Pape has some brilliant, engaging and fun ideas, and they’re worth looking into if you’re seeking inspiration.
The bottom line is that our children are living in a world with ‘invisible money’.
Eftpos, credit cards, direct debit, Afterpay, rent-to-own, ApplePay… as convenient as they are, these are all contributors.
Last year, the Financial Planning Association of Australia (FPA) conducted a survey of more than 1000 parents: one of the findings was that a significant number of parents believe wholeheartedly that digital money has affected their children’s ability to understand its value. And this is a legitimate concern.
The digital money world is complex and sophisticated – there are various ways to structure borrowing, make investments and conduct day-to-day purchases. There’s a downside too, an increased risk of hackers and scammers. So, it’s really important that children are sufficiently informed about these.
But technology is not the enemy. In fact, it can be harnessed to teach children about wise money management. Some banks have put a great deal of thought into this and are capturing children’s imaginations through the use of clever websites and apps that can be linked to bank accounts to teach children about money.
For younger children and those kids not particularly mathematically minded, there are many with lots of visuals and graphs, which make these tools interactive, fun and educational.
Schools are starting to include some financial basics in the curriculum too, which is long overdue, but learning at home and joining the family ‘team’ can start at an early age.
Of course, kids don’t need to be burdened with the big financial pressures like mortgages and retirement savings, but it’s important to involve them when it’s appropriate (such as saving for a special outing in the holidays, or learning that turning lights off is better for the planet and the electricity bill!) because it sends a strong message that the family’s financial health is not just the domain of the adults; the children can contribute and make a positive difference too.
Starting a managed fund can also be a good way to teach children about compound interest, fees and taxes, and the cycles of the investment market when they’re old enough to grasp the concepts. A lot of families do this – making contributions at birthdays and Christmas (and inviting relatives to do the same) and then encouraging the children to also contribute once they hit their teen years and get part-time jobs.
Over time, the small fund grows into a significant nest egg they can add to, or use for university, a car, travel, or even a home deposit.
Budgeting basics – that is knowing what you earn and what you spend – will always hold your children in good stead. Although as soon as you set them up with pocket money, they’re likely to be impetuous and frivolous; have patience. Consistent guidance will pay off. The bottom line is that we want them to know that understanding money is important and their relationship with it as time goes on is what will determine whether they live a life in debt, or one of prosperity.
Learning good money habits, particularly how to save, is a lesson for life.
The information contained in this article has been prepared without taking into account your individual objectives, financial situation or particular needs – it is GENERAL ADVICE ONLY. Before acting on any information in this article, I recommend that you consider whether it is appropriate for your individual circumstances.