[Image credit: Max Pixel]
It’s human nature to learn from those around us, especially our parents.
According to the PISA assessment, “[Australian] students from low socioeconomic backgrounds had an average financial literacy score of 107, below those from high socioeconomic backgrounds.”. This, despite all public schools having the same set curriculum.
Regardless of your socio-economic background, remember that your example, the parents', is the most powerful influence on their adult lives. The school system can do their job at supporting financial literacy skills, however this will be forgotten in the face of parents that live in financial chaos.
If you are still living in financial stress, here are three steps you can do right now to get started on the right track with your children:
1. When they receive cash as gifts, give them advice on how to handle it
Ms Scully, the mother to a teenager said that despite her daughter receiving money from gifts and earnings, “she still wants mummy and daddy to pay for everything ... but she wanted an iPhone, she wants to go on a holiday to central Australia and we've said, we're not paying for it.”
Think of this stage as your child having their L-plates on. This is learning the theory before they age into their P-plates and are in control of the entire vehicle.
A great method is to divide it into thirds:
a) Save for a rainy day;
b) Save for something specific;
c) Spend freely
2. Encourage your child to earn money
Starting as early as possible, teach your child that earning money is possible.
I’ve seen many teenagers/young adults being part of a growing group of people living at home with their parents until their 30s, mostly unemployed. You’ve probably seen this as well.
Often it’s a confidence issue – that earning money is something one needs a degree for, or something other people are good at but they themselves can’t do it (or won’t do it, because that job is beneath them). This blog isn’t a parenting piece, there are many gurus out there, instead this tip is here because if you can work out the best way to encourage your child to earn money, they will be strides ahead for the rest of their lives!
3. Use an “hours worked” formula
This really helps cement the worth of money for children. Money isn’t just whether or not something is a good deal, it’s also how much work was involved in getting it.
For example, when I was a child, I thought that getting a $200 pair of jeans for $50 was an amazing bargain! I’d just saved $150 …. right?
In reality, I’ve spent $50 on a pair of jeans.
Now if we compare this to the wage I was earning at Hungry Jack’s at the time of around $8ph, we can see that I needed to work 6.25hrs in order to pay for those jeans (ignoring tax and other deductions).
Using a formula like this helps give a real-world perspective to money. It also helps children learn to prioritise. If they’re going to be working that 6.25hrs anyway, they might choose to spend those earnings on something more worthy.
Most importantly, relax! There is no need to stress over money when there are experts like The Income Organisers here to help you take back control.
Have a wonderful week,
The Income Organisers