How to help your kids achieve their dreams

THERE are plenty of good reasons to educate your children about money especially as they progress towards being independent.

Teenager

THERE are plenty of good reasons to educate your children about money especially as they progress towards being independent.

Major milestones in a teenager’s life almost always involve money.

Whether it is buying a first car, travelling overseas, getting a first job or moving out of home, these exciting events come with a lot of responsibility and can be just as challenging for parents as for kids.

A recent survey by the Foundation for Young Australians found that around one third of Australian 15 year-olds are not proficient in problem solving, financial literacy or digital literacy – skills which are considered crucial for future work and life.

FYA deputy CEO, Bronwyn Lee said demand for financial literacy skills has increased 7 per cent in recent years.

“Job ads seeking financial literacy skills are offering, on average, an additional $5,224 in a yearly salary,” Lee said. What better reason for everyone to start honing these skills.

There is a financial literacy component taught in high school as part of the national curriculum but the earlier you start teaching your children about money, the easier it will be as they move along the path to independence. 

Matthew Deeble Director of Evidence for Learning says parents need to develop their child’s financial skills over a period of time so it isn’t a shock when they leave school.

“Build activities at home where you look at concepts over time. For instance, if you borrow money for a certain reason work out together how much it is going to cost to pay it off over a period of time” he said.

Compound interest, which is easy to teach when kids are young while saving money, becomes even more significant when talking about borrowing money in later years. Introducing older kids to the basics of budgeting by explaining how the family budget works also teaches them about compromise.

If they want their own car, rather than buying it for them or borrowing the money, encourage them to do some part-time work and help them manage their savings. You may even help them by agreeing to match their savings once they reach a certain amount. The same could go for an overseas trip.

Electronic transactions are increasingly the norm so it is important to actually show kids how much money is going in and out of an online account, whether interest is being charged or paid and even where costs could be reduced. 

“Also building awareness of scams and the sensitivity around putting personal information online is important to learn” Deeble says.

Rakesh Gupta Senior Lecturer, Griffith University Business School says our relationship with money is complicated but if you teach kids to take responsibility for it then managing money is not that difficult.

He says parents need to show their kids that we all have budgets and we all need to make compromises.

“We talk about money when kids overspend on their mobile phones, for example, but we don’t talk about it in a positive way,” he says.

Rather than telling your kids what you cannot afford to do, why not involve them. For instance, tell them the family has $2000 to spend on a holiday and ask them to work out how you can all have the best time for that price.

Kids are often better than parents at researching and finding the best deals and we should let them be involved in these family financial decisions, Gupta says.

Originally published as How to help your kids achieve their dreams