Do you ever wish your mother had given you more money advice?
Growing up, many of us were told that sex, politics, age and money were subjects not to be broached. Even today, having frank discussions about financial affairs are still taboo among many families.
It seems we have made progress with women driving, or at least discussing their family’s financial affairs, with research showing women are more open than men when it comes to talking money with family.
ASIC’s Australian Financial Attitudes and Behaviour Tracker revealed that 32 per cent of Australian women are more likely to openly discuss their household finances with their parents or family, compared to only 19 per cent of men – and mums are more likely to talk about finances with the kids (18 per cent) than dads (12 per cent).
With the current generation of millennials in need of taking a new approach to the great Australian dream of buying a home, retirement planning and superannuation, it’s more important than ever for us as parents to connect with our children as early as possible and instil financial smarts which will help equip them to handle their financial future.
Here are some ways to bring finances out in the open among those that matter most and help shape our children into money savvy adults:
Communication is the key
A 2017 Millennial Survey revealed that less than 10 per cent of Australians in this generation (those typically born between the early 1980s and mid 2000s) believe they will be financially better off than their parents, with one in four naming income and wealth as top concerns.
Being open and honest about finances with your children is significant in their future financial, psychological and personal wellbeing.
Growing up in uncertain economic times with high unemployment, a continually rising cost of living and sky-high property prices, millennials will need to save more and be money savvy to become financially responsible and survive as independent adults.
Explain where the money goes
Give them an understanding of how your income is spent – talk about all the expenses associated with living and running a household, not just the obvious ones such as groceries, bills, sporting equipment or going out for a meal, but power bills, school fees, council rates, car costs and insurance.
Also highlight the need to set aside some money for unexpected expenses that crop up along the way, and the peace of mind that having set aside emergency funds provides.
Don’t count on get rich quick investments
Some people may get lucky, but most wealthy people have not made their money from picking a few magic shares on the stock market or pyramid investment schemes.
Instead instil in your kids that budgeting and putting small amounts of money aside regularly for savings and investments will help them build wealth and enable their goals and aspirations to happen.
It’s also fun to use traditional board games like Monopoly to help teach our kids the basics of buying and selling property, and if you’d like to introduce high school children to investing and trading on the sharemarket, you could encourage them to take part in the ASX Schools Sharemarket Game.
This is a fantasy game played over an eight week period in which teenagers and young adults learn how markets work, but importantly how it feels to
lose money.
Be a positive role model
Walk the talk and lead by example if you want your kids to learn how to manage their money properly.
Don’t overspend on credit – instead, save up for big ticket items and talk to your kids about how you plan to pay for expensive purchases like a car or a house.
That way, your kids will learn how to manage their money and your finances will end up in great shape too.
Plan for the future as a family
A goal without a plan is just a wish, so it’s important to take the time to sit down as a family and discuss your financial priorities for the year ahead.
Whether you plan to buy a new family car, have an overseas holiday or upgrade to a bigger home, establishing clear goals will help you to prioritise what’s important for your family now and into the future.
Get your kids involved by asking them what they hope to achieve this year. If funds are tight, prioritise the list together by working out what is most important to make sure they don’t miss out.
Spread the load
Kids should be made aware of how their actions impact on household finances early in life. While younger children shouldn’t be expected to make financial contributions, they should be able to contribute around the house.
Simple measures such as turning off the lights, having shorter showers and shutting down computers at night can all make a big difference to household running costs.
By setting these expectations early on, your kids will be on the right path to managing their own expenses when they leave home.
Teach adult kids the cost of responsibility
With the cost of rent increasing, young adults are flying the coop much later in life. It’s important to ensure children over the age of 18 are contributing to household expenses financially, rather than simply helping out with chores.
Sit down with them and run through your household expenses. Explain that in order to remain at home, you expect them to set aside weekly amounts of money to cover their share of board, groceries, utilities, internet and mobile phone costs. Not only will this give young adults a greater share of responsibility, it will also motivate them to enter the workforce.
Nothing in life comes free, and the earlier kids learn this, the better off they will be when it comes to managing their own finances as they get older. And remember, most young Australians consider their parents their most trusted financial source.
