By Liz Maroney, Westlawn Wealth Adviser 25 September 2014
Have you ever stopped to think how different things are for today’s children in terms of money and spending? Kids are demanding expensive tablets and smartphones from their parents at younger and younger ages – and expecting mum and dad to foot the monthly bill. They are also growing up in an increasingly cashless society where most things are paid for using EFTPOS, by tapping a credit card against a terminal or by making payments straight from our smart phones.
Money – real dollars and cents – is fast becoming invisible.
What effect must this have on children in terms of their understanding of the true value of money? And importantly, how will it affect their ability to save as they venture out into the real world and become responsible for their own finances.
This video from MoneySmart highlights the demands of our modern world on young people, where real money is disappearing fast.
“What kids learn about money today will change their tomorrow.”
Perhaps it’s now more important than ever before to teach our children the true value of money, and the real power of saving.
Five tips to help kids learn the value of money
1.Understand the flow of money. It’s not only important for kids to understand how much pocket money they earn each week, but also where that money comes from. And once they receive it, they should know where the money’s going. Understanding income and expenses at a young age will help them better manage their finances when they become independent.
2. Save part of every “paycheque”. To teach your kids the power of saving, encourage them to save at least 20% of every dollar they receive straight into a savings account. A simple rule is to deposit first and withdraw cash later (but only if they need it).
3. Shop around for the right price. Teach your kids to spend responsibly. Rather than buying the first gadget they see on the shelf, encourage them to think about whether they really need it. Is there something more important they could spend their money on? And, if they do decide they just must have it, is that the best price. Kids should learn to shop around for the best deal and not to buy on impulse.
4. Good debt vs bad debt. Some debt will always be inevitable and necessary throughout our lives. Some debt can even be good. HECS debts and mortgages may fit into this category. Maxing out the credit card on clothes or the latest gadgets, however, does not. This is bad debt … and should always be avoided.
5. Set (realistic) savings goals. It might be to save $3,000 by the end of high school, or to buy a set of wheels by 18. Savings goals are important. By setting goals, both long-term and short-term, kids can see the progress they’re making, they’ll better understand the value of each decision they make, and they’ll likely be motivated to make better choices. The MoneySmart TrackMyGOALS app (more below) will help make setting and achieving savings goals so much easier.
Give the kids in your life a financial headstart
Teaching children the value of money and power of saving now will help them become better money managers as they become financially independent. But as a a parent, or grandparent, you may also want to provide the children in your life with an additional financial headstart. There are a number of tax-effective children’s savings plans available to help you do just that.
These savings plans are long-term investments that can be used for a variety of purposes such as:
Keep track of your savings goals with MoneySmart’s TrackMyGOALS app
Track your savings goals with this easy-to-use app. TrackMyGOALS allows you to set, plan, track and manage savings goals and visualise your progress towards achieving those goals.
The TrackMyGOALS app helps you develop good savings habits by creating realistic savings goals, prioritising your goals to ensure they can be achieved, and providing positive encouragement by tracking your progress.
The app can be used by both children and adults. Use it to track your saving for a holiday, wedding, car, house, renovation, school fees or anything else. Find out more and download the TrackMyGOALS app here.
General Advice Warning The advice on this site may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial, tax and/or legal advice prior to acting on this information.
Westlawn Wealth Management Pty Ltd ABN 32 124 861 409, Authorised Representatives of GWM Adviser Services Limited ABN 96 002 071 749, Australian Financial Services Licensee, 105 -153 Miller Street North Sydney NSW 2060.