The statistics are sad, scary and far too true. One-third of Gen Y have no savings and are struggling with debt. One in five could not find $500 in an emergency, and one in two young people experience financial stress on a weekly basis. It is little wonder that anxiety and depression have become so prevalent amongst our younger generations. This is why it's so important for parents to under how to teach your children about money.
As a budget coach, these statistics are absolutely heart-breaking because this isn’t how it should be. The core principles of wise money management aren’t difficult to understand or to apply but other than a lesson or two in Year 9 maths, no one is purposefully teaching children about money and money management.
Parents, I am sorry - whether you like it or not, it is your responsibility to teach your children how to manage money. It is your responsibility to teach them:
- how to budget
- how to save a percentage of every dollar they earn
- how to avoid lifestyle debt
Getting Started with Children & Budgeting
This is not something you can palm off to your children’s teachers. Practical money management skills need to be lived as much as they are learnt; they need to be a consistent part of everyday life and ideally, it should start at a young age.
It starts with pocket money and two simple rules:
- You must save at least 10% that is put away for the long term
- The rest you can spend but you cannot spend more than you have saved. If you don’t have enough, you must wait until you do. Savings charts are an awesome visual aid for saving.
Budgeting in the Mid-Teens
As they get older and more focused on wanting ‘stuff’, provide opportunities for doing good honest ‘hard work’ so they can learn the value of money. Help them save towards things they really want and let them make mistakes - they will blow their money on dumb stuff and regret it! Whatever you do, don’t bail them out.
Once they get to their mid-teens, you must give them bigger opportunities to manage money and to fail. And this is so important - once they are old enough, encourage, no push your children to get a part time job. There is no better way to learn the value of money than working your tail off for $10 an hour!
And once they have a part time job, please teach them to budget because if you don’t, you can be absolutely certain that clever marketing, peer pressure, and easy credit will fill the void. When that happens, they will become one of the statistics I began this blog with.
Teaching Your Children - A Real-Life Example
At the beginning of this year, I had the wonderful opportunity to sit down with my oldest daughter, Hannah, to help her set up her first budget in our new Grandma’s Jars application. I am proud to say she had been nagging me about it since she had got her first weekend job some 6 months earlier!
Now that she had a regular part-time income, some costs like discretionary clothing, her mobile plan and entertainment became her responsibility. We also gave her the responsibility of managing her entire grooming budget, and the money we allocate to spend on her clothes now gets transferred to her bank account monthly.
There have already been several occasions where she has been forced to make tough choices to stick within her jar allocations; she has had to say ‘no’ to some opportunities so she could afford to say ‘yes’ to the ones that matter most. But at the end of each month, the rewards are there when she can transfer a fair amount of her income into savings.
Set Your Children Up For Success
Despite what your kids, and particularly your teens may say, they are looking to you for guidance. Money management is an inescapable part of life and the consequences of getting it wrong are far too great to leave it to chance.
The two most common comments I hear from my budget coaching clients are...
“Nobody ever taught us this (money management skills)”
“I wish I had known this 10 years ago”
Parents - it is your responsibility to teach your children the money management skills they need to thrive in world where one in three young people are living pay cheque to pay cheque and struggling with credit card and lifestyle debt, one in five could not find $500 in an emergency and one in two young people experience financial stress on a weekly basis.