As a parent myself, I’m assuming your child’s physical, social, emotional, developmental and psychological wellbeing has been important to you since they were born.
However, what about their financial wellbeing?
Learning about money and building good financial habits provides strong foundations to help children succeed, so it’s great to see the NSW government’s Financial Literacy Challenge to help young people better understand how to manage money. The new challenge – which allows students to experience the finances of owning a pet or car – replaces school banking programs, which NSW has made a thing of the past from 2022 in line with other states.
A child’s financial wellbeing depends on their stage of development, financial capability and their family.
For example, if a child watches adults try to hide financial mistakes or worry about money-related decisions, it may lead to anxiety about money in their adult life. Conversely, sharing positive money stories within a family is a way to normalise money habits.
Around 9400 Australian students were tested in a 2018 OECD survey conducted on the financial literacy and application of 15-year-olds.
Encouragingly, it found that there was no gender gap in the financial literacy of the participants. However, the study exposed a class divide: 80 per cent of students in the highest quartile of socioeconomic background achieved the national proficient standard, compared to 47 per cent of those in the lowest quartile.
A further area of concern, according to the Australian Council for Educational Research in 2020, is that Australia had the largest performance difference between its highest and lowest achievers, at 349 points compared to the OECD average of 308 points.
Thankfully, there is a growing appreciation that preparing Australians to succeed and have a better financial future starts in their early years. Doing so across the country can help us close the youth financial literacy performance gap.
So, where to from here?
• Start early. You can use day-to-day experiences like trips to the shops as an opportunity to start a conversation about how you use money. When my children were little, I would engage them by playing games like running an ice cream parlour and using toy money to buy their yummy (pretend) sweet treats. As they got older, dinner table conversations were used to introduce other topics like what it takes to earn money, to have a budget, to pay bills and how to make choices about the things they want to buy.
• Building savings as a behaviour. Learning to save is an essential good money habit and is one that takes time and practice. Helping your child save for their short term goals like buying a new game or bike helps them learn the importance of delayed gratification, which will enable their future selves to save for their long-term goals.
• Embracing JOMO (Joy of Missing Out). Let’s face it, instilling good money habits does not come without challenges. One reason is FOMO (fear of missing out). With Black Friday and Cyber Monday coming up later this month, children and indeed all Australians, will see a plethora of marketing messages. There is an antidote to this veritable bombardment of the senses with messages designed to entice people to buy more.
By building JOMO, which is about focusing on feeling content with missing out on what others are doing or buying and disconnecting as a form of self-care. For my family, it’s about reconnecting with nature or reading.
• Finding ways to earn. It might be chores at home or by igniting your children’s spirit of entrepreneurship. For example, selling used toys, and other household goods is a great way for children to learn the value of money and how it can help them reach their goals. Also, check out the Youth Impact HQ, part of the Westpac Youth Impact Challenge, which offers fun, interactive, and educational content to learn about the world of entrepreneurship.
• Learning about ways to grow their money. As kids get older, you may consider starting to talk to them about investments such as company shares and property. Showing the connections between the real world and investing, perhaps by talking about listed companies whose products or brands they know or use, can help children learn about different asset classes.
• Learning to love the gift of giving. Teaching the value of giving to others can help children build character traits that will take them far as they grow and show them that they can use their money for good.
Beyond what can be learned at home, organisations across the country, including Westpac’s Davidson Institute, are helping to improve the financial wellbeing of Australians more broadly. ASIC’s Moneysmart is another great resource.
With Australians’ household debt to income levels amongst the highest in the world at around 180 per cent, compared to 113 per cent in 2000, and the festive spending period ahead, the more help the merrier.
And for our children, the sooner they learn healthy money habits the better.
This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice. © Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.