Think you nailed the back-to-school checklist? Here’s one more thing

Parents all over the country are breathing a sigh of relief that all that frantic back-to-school preparation is over (or soon will be). But is there an important item you forgot to put on the list? New research suggests so.

More than 80 per cent of parents apparently agree that money is a “very important” lesson, according to a survey by RACQ Bank. But one in five of them are waiting to teach it until their children are over the age of 12.

Your kids’ main money lessons – and modelling – will come from you, not school.Credit: Aresna Villanueva

Also worryingly, the research reveals that less than half of parents discuss finances and budgets as a family.

So, let’s look at the three things you need to put on the checklist for your children about money and its mastery … not just for this year, but to change the course of their lives.

1: Teach that money is finite

Twelve years old is far too late to try to nurture the right mindset for smart money management. And the vital “it’s finite” lesson is the fundamental reason. For this, and the related next checklist item, it’s never too early to start.

While we might all be encouraging our kids to be friendly and make new connections at school, loyalty is for people, not financial products.

But the added difficulty with money is that our small ones need to learn quickly that something that is now essentially invisible still runs out.

As kids get older and begin to appreciate money’s power to get them things they want, they need to see the ebb and flow of money, and experience the wait until it’s replenished. Whether it’s coins in jars, lines on a chart or celebrations on an app, you must make money salient.

Because everyone – no matter how puffed up their pay packet – must eke out money, and allocate it assiduously.

2: Convey that strong motivation defeats instant gratification

OK, if not defeats it, then helps resist it. And you will be able to tell almost from the outset – particularly from their behaviour with food – whether your child is going to need a little help saving something for later. Instant gratification in some of us is almost hardwired.

But if the previous lesson might come across as a little negative, this is where you put a positive spin on it.

Want to know how to give your kids an enthusiasm for money and its management? Show them its power to give them fabulous things and experiences (and down the track, options and opportunities).

Consider using my magic money split as your kids’ goal-targeting gospel: the “fritter, fun and future” split. This is:

• short-term living and playing – 50 per cent to fritter
• medium-term savings – 40 per cent for fun stuff
• long-term savings – 10 per cent for future you.

The goals above need to be so sweet and salient they can almost taste them. That’s the only way, for any of us, that it becomes palatable to resist the temptation to waste your money on, well, whatever takes your fancy.

Is it a Lego set? Giant squishmallow? Their first car? It helps to create “exquisite anticipation” too – use apps, progress charts, pictures – whatever works.

And by the way, the same razor-sharp focus is what promotes success in school, higher education and jobs. Even in health and fitness, getting right the balance between restraint and reward is a game-changer in life.

3: Instil that, when it comes to money, it’s rates, not mates

This is very specific to financial products and the execution of the above attitudes to money … as your children grow up and start navigating all the marketing targeting and spending facilities out there.

While we might all be encouraging our kids to be friendly and make new connections at school, loyalty is for people, not financial products. Einstein – when he named compound interest the eighth wonder of the world – apparently continued thus: “He who understand, earns it. He who doesn’t, pays it.”

In other words, compounding works for you when you have the money and lend it to someone else (think savings or investments). It works against you when you borrow … and for the privilege, pay extra in the form of interest (any form of credit or loan).

Further than that, communicate that the amount of interest and earnings you either make or pay matters hugely to your ultimate wealth.

Congratulations on nailing the back-to-school checklist, but just add these few easy, essential items. The fact is that your kids’ main money lessons – and modelling – will come from you, not school.

Nicole Pedersen-McKinnon is author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, X and Instagram.

• Advice given is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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