But, for the most part, we still have no personal financial management education being taught in Australian schools.
The reality is that as kids we still learn almost everything we know about money from our parents, and what we learn and absorb largely dictates our own relationship and behaviour with money as we move into adulthood.
As a parent, irrespective of your financial situation, here’s five things you can teach your teens to ensure they’re well prepared as they start managing their own money.
1. The 50/25/25 rule
This is a super simple rule of thumb to teach your kids how to deal with any money they earn, and if they can start doing this with their pocket money, or income from a part time job, they’ll be more than ahead of the pack by the time they graduate and start earning a full time salary.
Save 50 per cent of anything that comes, use 25 per cent for things you need (like bills), and treat yourself with the remaining 25 per cent on something you really want (but don’t necessarily need).
This easy to remember and easy to implement rule teaches the difference between needs and wants, creates a disciplined habit of saving for the future, while still allowing them to spend some money now.
And it highlights that with all income received there is room for instant gratification (with the 25 per cent portion allocated to desires) along with being sensible by covering your bills and saving for bigger things later.
One in seven Aussie kids think cash from the ATM is free money. On This Glorious Mess, we discuss why they don’t understand money. Post continues after audio.
2. Save toward a goal
When it comes to saving, it’s far more effective if we have a goal we’re saving toward.
The reason for this is that having a goal not only motivates us as we see our savings grow and our dream become a reality, it also stops us from dipping into our savings for something that comes up now.
Knowing that our savings are focused on achieving something or buying something helps us stay focused, and we know that if we spend money out of our savings we’re pushing that goal further and further away.
3. You don’t need a credit card
We’ve been brainwashed to believe that part of becoming an adult is getting a credit card, that is a thing that everyone needs when they ‘grow up’.
This is absolutely not true, and my counter argument to the whole needing a credit card for an emergency, is that I’d rather just have my own money saved up that I can use in case of an emergency.
These days all of our bank cards are either Visa or Mastercard Debit cards and can be used to pay for anything online in the way that a credit card would, so that debunks the myth also that we need credit cards to book flights or pay for other things online.
Credit cards are not needed, and even if they are used responsibly and paid off in full at the end of each month, the likelihood of overspending is high. When we’re spending money out of our own bank account, we think a lot more about the purchase and whether we really want to spend our money on it, than we do when using a credit card.