Tough money future for your kids to navigate – here’s how to help
Spending money has never been faster or simpler thanks to technology and our consumer society. It’s creating fresh challenges for young people, so parents must be more vigilant.
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Harsh new financial challenges face young Australians as money becomes easier to spend but harder to save.
And parents play a much larger role in children’s financial futures than they might think.
A new report by the Commonwealth Bank says young Australians are increasingly being held accountable for their money decisions made early in life.
Many children have mobile phones before their teens and are buying games, music and other entertainment online, while record-low interest rates deliver their savings accounts next-to-no interest and later make saving for a first home much harder.
The CBA report, The Right Start, says young people must deal with a fast-changing financial world amid rapidly evolving technology.
“A young person’s early experiences of financial attitudes and behaviours shape outcomes later in life,” it says.
The report’s author, Professor John P de New from the University of Melbourne, said digital technology had made it easier than ever for children to spend money.
“It’s understandable that, in this increasingly cashless society, children may mistakenly think things are free,” he said.
“They watch us buy things with the tap of a card, shop online, download music and movies, often without any notes or coins exchanged.”
Prof de New said positive behaviour learned early would set foundations for good financial habits as young adults.
“It is likely that parents underestimate the extent to which they influence their children’s behaviour with their own behaviour,” he said.
“Children learn very efficiently by repeated example – that is why children can speak a language fluently before attending school.”
People’s Choice Credit Union financial planning support manager Lisa Jones said lower interest rates could pose a challenge for young savers.
“But there are also many accounts that promote positive savings habits by offering bonus interest for ongoing deposits with limited withdrawals,” she said.
“Although rates are at a historic low, younger children can still learn from the positive behaviour these accounts promote.”
Ms Jones said young adults might have to consider higher-growth investment strategies to save for a home deposit, but ensure they understood and could manage the risks of growth assets such as shares.
“The biggest challenge comes from new forms of finance,” she said.
“Buy now, pay later schemes make spending much, much easier – but the penalties and fees for slipping up can really bite down the track.”
Ms Jones said young people might also be able to teach their parents something.
“Kids now have so many tools available, whether it is a wearable that tracks goals and actions, or apps that automatically transfer small amounts for micro-investments,” she said.
CBA’s general manager of corporate responsibility, Kylie Macfarlane, said teaching young people good money management did not need to be complex.
“A useful tip can be rewarding your kids with an additional boost to their savings fund if they reach their goal ahead of time,” she said.
WHAT PARENTS CAN DO
• Talk about money and financial concepts at the dinner table.
• Teach children the difference between needs and wants – perhaps getting their help to prioritise grocery shopping lists.
• Make savings fun with competitions between family members.
• Track savings visibly at home, perhaps on a fridge or whiteboard.
Source: CBA
Originally published as Tough money future for your kids to navigate – here’s how to help