A study conducted by the Commonwealth Bank of Australia (CBA) this year found that children aged 5 – 12 scored 63 out of 100 points in a measure of how financially savvy they are. Of particular note, this is 1 point higher than the adults scored.
It is also interesting to note that the children from lower income households scored identically to those from higher income households, which demonstrates that there is little difference in the ways we are teaching our children about money.
This is a positive sign, and hopefully bodes well for the future generations. The children scored particularly well when it came to saving for items that they wanted, rather than seeking to borrow funds from their parents (or using a credit card for that matter).
One area, however, that the children did perform quite poorly in is personal budgeting. While the group of parents scored relatively well in this category, it is clear that we are not doing enough to teach our children the importance of budgeting.
What can we do to start teaching our children the importance of budgeting from an early age:
1. Long-Term Savings Accounts
Many banks these days will offer higher interest rates if your child doesn’t dip into their savings too soon, encouraging long-term saving. This can be a great way to teach them the value of staying on track with their goals.
2. Short-Term and Long-Term Goals
It’s an important lesson to teach your children how to budget for their short-term goals and long-term goals. This could be as simple as saving a few dollars for a new toy to saving for a few months for a new game they desperately want.
3. Giving to Charity
It can be a valuable tool to teach your children the importance of giving back, whether in the form of regular donations or making a contribution at certain times of the year, such as the Salvation Army at Christmas time.
4. Time = Money?
It’s important as parents you spend the time to find jobs for your children to allow them to realise the value of working for money. This could be mowing the neighbour’s lawn, weeding a family member’s backyard or even running their own cake stall at a local fair. By teaching them about earning a wage for their time as well as running a small business such as a cake stall, they will quickly learn the difference and relative value of the two.
5. Celebrate the Successes
When your child achieves a certain financial goal, celebrate with them and help them to realise that their commitment and discipline has paid off.
By instilling the right skills early on, we can help to boost the financial literacy of our children, and maybe even learn a thing or two from them.
To Your Financial Success!
Jarrad Brown is an Australian trained and qualified Fee-Based Financial Planner with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to international and local professionals in Singapore.
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DISCLAIMER: Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.