The earlier you start with financial education, the easier - and cheaper - it is for you to secure your future and have the freedom to pursue your dreams. With financial literacy being 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?
Not very well it would seem.
A recent survey of 1,100 high students from around the country found that teenagers confidence was much higher than their actual financial capability, the overall results suggesting that our kids are increasingly at risk of financial failure.
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, the title of his bestselling book that has given thousands of Australians the knowledge and tools to revolutionise their lives. Scott urges parents to view pocket money/allowance as a tool for financial education, and not to give children money for nothing - they already get their food, board and education paid for, 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. The dirtier the better; crappy jobs build resilience.
This is a subject I have discussed with many of my friends recently, and the best example I heard was a couple who handed their 13 year old all the financials associated to her. She was given an allowance to manage her “needs” - board and food, education, extra curricula costs, and was expected to work to pay for her “wants”.
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 so they are exposed to all the online consumer traps and may make some mistakes, but with total transparency parents can reinforce important lessons as they occur. The app also encourages savings with built in savings goals for kids to work towards.
With formal education playing a limited role in developing financial literacy, parents do need to take their role in their children’s financial education seriously. Generally, the best advice is 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 - it is an invaluable experience!
And finally, enlist the support of your kids school - arrange to meet with curriculum coordinator and make your case for including financial literacy as a learning area. There are some great learning tools - MoneySmart/ Banqer /Earn & Learn - available to assist teachers and engage students.
Let’s work together to educate kids on the important financial concepts so that they can leave school with the confidence to manage their personal finances and the capability to make good financial decisions for their future.
Insights from Liz (Banqer team member and financial education advocate). This post was originally posted on Liz's Linkedin page.