I am delighted that our kids are increasingly being taught money skills in the school curriculum. Money skills are a “must have” today, and while this is a relatively new initiative, it is a global trend of such importance that it is being tested by the Organisation for Economic Co-operation and Development (OECD), along with maths and science.
In the latest results our kids ranked fifth in the world for financial literacy.
The OECD’s testing focused on 15-year olds, and with good reason - money matters are a part of everyday life for teens. Many have part-time jobs and already use financial products. Here in Australia for instance, 79% of 15-year olds have a bank account of their own.
Moreover, at this stage teens are nearing the end of their compulsory schooling and will need skills to budget and manage their money through key milestones like starting university or TAFE, enjoying independent travel, and moving out of home.
Parents deserve a pat on the back for helping develop their youngsters’ money skills, but you don’t have to wait until your child is in high school to start. Children can learn basic money management from a very early age.
The OECD found 71% of our children receive pocket money. Most are expected to help with a few jobs around the home in exchange for the cash, and it’s a great way to teach kids that money needs to be earned.
Pocket money can also be a useful tool to teach children simple budgeting. Helping your child work out how much they need to save each week to reach a certain target can stand your son or daughter in good stead for later life when it comes to something like saving for a first home.
Any money children have left over from their key savings can be allocated across different spending buckets - from buying treats at the school canteen to paying for hobbies or sports.
Budgeting becomes a lot easier when children have their own bank account. Many schools offer formal banking programs, which are a great idea. And of course, a savings account gives children the incentive of earning interest on their money – something that doesn’t involve doing more chores!
Importantly, the OECD found teenagers who have a bank account of their own scored more highly on financial literacy than those who don’t.
One of the easiest yet most effective steps parents can take to help their children develop good financial habits is simply to discuss money matters.
Happily, 84% of teens talk about money with their family and it’s a great spring board to launch conversations about saving, investing and borrowing as a child progresses from their school days into early adulthood.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.
Managing family finances
Our short online learning module looks at the importance of budgeting and protecting your family through things like insurance.