According to a survey conducted by Savvy Finance in January 2020, 30% of parents had never discussed good financial habits with their kids. Finance and money is something that every child will grow up to use and financial literacy is as important as literacy and numeracy as a whole. When your child leaves home and starts interacting with finance such as their workplace, putting aside money for superannuation, applying for personal loans to finance their first car, or even saving for a home one day, having good financial literacy now is a skill that will last a lifetime. Here are five steps toward teaching your children financial literacy.
See a financial adviser – literacy starts in the home
According to the survey, four-fifths of adults have never seen a financial adviser. With financial literacy being thin on the ground at school, it’s up to us – the parents – to set a good example. Seeing a financial adviser can help you assess your own finances and grow your wealth into the future. It can also teach you key financial concepts you can pass on to your children. You can easily relate financial literacy using ideas they’re already familiar with. “Kids know about supply and demand; they just can’t express it in the way grown-ups can,” Savvy Managing Director and financial literacy advocate Bill Tsouvalas says. “They innately know that a chocolate bar is worth more than a muesli bar when it comes to swapping lunches. Kids ‘grind’ through games like Animal Crossing to earn currency and spend on in-game skins and other virtual goods. It’s a matter for us as parents to relate what they know to the real world.”
Talk to kids about “future you”
The most important financial concept kids need to grasp is the idea of “future you.” “Future you” is the person who will benefit the most from saving for a new toy or new release game; saving money instead of splurging on a treat or trinket now will deprive “future you” of that big reward. “Like using the games example, kids know more grinding, or work will lead to more rewards,” Tsouvalas says. “The more they can gather the more they can spend and the bigger the reward. ‘Future you’ might not be articulated or thought of, but you can talk to kids about it; especially around birthdays when they get a whole influx of money!”
Using games and activities to teach financial literacy
Games and activities are a fun way to teach financial literacy to children. Counting games, matching change to notes, identifying needs vs wants, and traditional board games like Monopoly, Pay Day, Catan, and many others help kids understand finance and money. As children get older, they can enrol into online stock market games, business management games like Six Points Hospital or Rollercoaster Tycoon, and many of the in-game currencies in popular multiplayer games. “Games are fun, memorable, and full of repetition and variation that expand children’s learning around finances,” Tsouvalas says. “Making finance fun is a big step toward cementing financial literacy in kids – and parents too.”
Giving kids control – apps and debit cards
Stashing cash away in a piggy bank is so last century. Giving kids access to smartphone apps and debit cards like Rooster Money or Spriggy. These are debit card and smartphone app that allows kids to figure out how to budget, understand earnings and costs, and gives them a bit of control over their finances. “You as parents can deposit money into the app for doing chores, for example,” Tsouvalas says, “if the kids didn’t do them and discover they don’t get anything, it’s learning the hard way in a safe and easy to understand environment. It’s a great learning tool and sets them up for interacting with more advanced finance concepts in the future.”
Books, resources, and tools – interactive learning
There is a wealth of books, resources, and tools for interactive learning around money and finance. The first site you should bookmark is the kids’ section on the ASIC MoneySmart website. Getting them involved early means they can use it as a ready reference for simple money matters all the way up to mortgages and shares. Books such as The Tuttle Twins and The Barefoot Investor for Families is a shelf-ready resource kids and parents can take advantage of at every level. “Having a small library either on your bookshelf or online will help the entire family develop great habits around finance and a literacy that will stand the test of time,” Tsouvalas says. “It’s a modest investment that will reap huge rewards – that’s the first step toward financial literacy right there!”
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