While the age of digital finance has made spending money fast and easy, it can be devilishly complicated to instill lessons around the real value of money, and the consequences of that spending.
In short, some of the money lessons we might have learned from our own parents (“always pay with cash”, for example) just won’t cut it anymore. Here’s how to get started with teaching money management to children sometimes called “the invisible money generation” — financial literacy.
Give digital pocket money
When your child decides to spend their pocket money on something, “Help them and encourage them throughout the process, and when they do achieve it, make a big deal out if it”, says Mr De Gori. The concept of using pocket money to teach kids about money is still solid — but as your children reach late-primary school age, paying pocket money digitally can teach them to keep an eye on where each dollar goes.
“If you give someone $10 online you can work with them to track it carefully and have conversations like, ‘What did you spend it on? Was it on sale?'” says Laura Higgins, senior executive leader at ASIC MoneySmart. “Pocket money can go straight into their bank account and you can monitor that. From the beginning you can set up great habits around spending and saving accounts,” says Ms Higgins.
You might want to look into setting up a bank account and linked debt card for your child. There are special prepaid debit cards designed for children under 18 that allow parents greater control.
To help your child understand that digital money is “real” money, Mr De Gori suggests their pocket money should be earned as a reward for chores around the house, rather than gifted as an allowance.
(This view is somewhat controversial; some families choose not to pay pocket money for chores, not wanting to set up an expectation that kids will be paid for contributing to the household.)
Once you’ve established a system for paying your kids’ pocket money digitally, look at their finances together, and talk to them about carefully planning and saving for any future buys. Ms Higgins has a 12-year-old and a 19-year-old, and says her kids’ purchases “are always made in consultation, and they’re never made immediately”.
She explains, “The kind of conversations we have are: ‘You can’t have everything you ask for’. It’s about: ‘If this is what you want, what is the opportunity cost? You might not be able to have that’.”
Mr De Gori explains these conversations are about teaching them that online money is real, hard-earned money — and that you can only spend what you earn. “The core principle of having to work and earn the money is still fundamentally the same as in previous generations, and nothing changes that,” he says.
“A tip for parents is to go back to basics; the best thing you can teach your kids is to earn and save for what you really want. Nothing achieves the same sense of satisfaction as when you’ve earned something yourself.”
Use their first job as a learning moment
In a world of cashless, tap-and-go payments, having conversations about wages when your child starts his or her first job is one way to foster financial literacy. Is your teen old enough for a part-time job? Perfect — you’ve got yourself an opener for a whole slew of money conversations.
“If you’re old enough to work a real legal job, that’s when you start having access to at least a joint account or a linked account,” says Mr De Gori. He suggests seizing the opportunity to start learning how the economy works, and have money conversations around rates of pay, taxes and superannuation.
No, they don’t need to know the ins and outs of tax thresholds, or the minutiae of super funds, “but they at least should have the ability to say — yes, I’ve got super and it’s with X, Y or Z”, Mr De Gori says.
They should also have a basic understanding of the concept of tax — the fact that when you work, “you then become a contributor to society,” Mr De Gori adds.
Build money into everyday conversations
Educating your kid about money isn’t a one-time conversation. Ideally, you’d be building money awareness into everyday conversations. “The conversations to have are around: How do we make choices? Is that a need [or] is that a want?
Can we wait for that, can we save for that and can we plan?” says Ms Higgins.
The opportunities to start those talks are endless. Next time you’re filling up your car with petrol, you could discuss the fact the price fluctuates, and compare whether it’s the same with the next station over.
Or if your teenager wants strawberries from the supermarket, you could discuss how they’re out of season and that makes them more expensive.
“Pay attention to what they’re doing now and what piques their interest. There will always be a way in to talk about money. If it’s sports, talk about, ‘How much do soccer boots cost?'” suggests Ms Higgins. “Kids like to know about the world and how things work. Often it’s about finding those authentic and learning opportunities.”
Tim Connolly 