For many of us, our first experience of banking and savings was the school Savings Account Program.
But in 2019 the Australian Securities and Investments Commission (ASIC) raised concerns that these accounts had a little lasting impact on children’s savings behaviour.
All parents want their children to be better off than they were – more secure and financially independent, but the big question remains: where do you start?
Ushering your children toward financial security can be a simple three-step process.
Step 1: Create good habits
Start early; learning to save is one of life’s great lessons. In an increasingly cash-less society, it can be difficult for children to understand the value of money and how to save.
Help them by:
- Providing a piggy bank for very young children or a glass jar through which they can see their savings mounting up.
- Teaching the difference between needs and wants. Lead by example with your own savings habits.
- Involving them in the household budget; compare prices at the supermarket and demonstrate billpaying.
- Paying pocket money for age-appropriate chores and helping them to create a mini-budget, apportioning money to:
- spending on anything they want.
- donating to charity to instil a sense of community and empathy,
- saving for a goal; helpful in teaching kids restraint and how to avoid impulse buys.
Step 2: Inform
Nothing is free; water in the tap, electricity and even the internet don’t just happen by magic. One of the best ways to teach kids about responsible money handling is to explain debt and the consequences for not meeting financial obligations, which segues neatly into a discussion about personal credit scores.
People with better credit scores find seeking finance approval easier and often qualifies them for more advantageous lending deals and better interest rates.
Helping kids understand the concept of a credit score can be a little daunting, so try these tips:
- Brush up on your knowledge first.
- Don’t focus on numbers, explain that it’s about financial behaviour over time.
- Avoid complexity and keep the information age-relevant.
- Use examples. Discuss the mistakes you’ve made in the past, explain how you rectified them.
Step 3: Consider where you’re saving
Record-low interest rates have taken the fun out of savings, but don’t let that stop your kids from calculating how much they can earn from the right type of account. The Moneysmart website has savings calculators that kids can play with and learn from.
The banking and finance industry offers a plethora of accounts specifically designed to encourage kids to save. Help them research the account that will suit them; consider fees and interest.
Additionally, searching online will reveal a range of websites, blogs and apps dedicated to engaging and educating kids about money and savings.
Introduce your kids to good habits while they’re young, and you’ll be setting them up for success.
Finding the most child-appropriate plans and accounts that specifically suit your child’s needs can be a minefield. Your financial adviser will be happy to work with you as you guide your children into a financially secure future.
Sources:
Review of school banking programs. Consultation paper 323 (October 2019)
Teaching kids about money (no visible date)
Savings goals calculator (no visible date)
ALSO READ:
Unlocking Financial Secrets for Different Phases of Life
