In our hyper-connected digital age, news about self-made teenage millionaires and cryptocurrency trends abound and yet, on the other side of the coin, research shows financial literacy in young Australians is declining.
Education experts have noticed a decline in the performance standards of Australian students in the past decade or so, and stress the significance of these skills for future success in a constantly shifting economic landscape.
The federal government has injected millions of dollars into the Helping our Children Understand Finance policy over the past few years, including ASIC’s MoneySmart initiative, which hosts a range of resources for school teachers and parents to teach children financial skills.
Yet there are simple, everyday ways adults and parents can encourage financial literacy in young and school-aged children. Here are five.
1. Model positive attitudes and behaviours towards money
Education expert Carly Sawatzki believes financial decisions are inherently shaped by complex factors such as values, emotions and family experiences.
Parents can influence their children’s financial behaviours by displaying and reinforcing disciplined approaches to money matters, such as the practice of forward-thinking, self-regulation and critical thinking.
“A ‘future orientation’ is … a tendency to consider future consequences and a willingness to delay gratification in favour of longer-term goals. Being aware of our financial motivations and having the ability to critically analyse our decisions is also important,” Sawatzki recently wrote in The Conversation.
“It’s time for a shift from teaching children rote-learned financial rules of thumb to instilling dispositions and a thinking process that underlies good financial decision-making,” emphasises Sawatzki.
Sawatzki’s observations reflect the frequently-cited findings of the classic 1960s Stanford “marshmallow study” which found children who displayed a tendency towards delayed gratification between the tender ages of three and five were more likely to succeed later in life.
2. Don’t shy away from talking about money with your children
Due to a reliance on digital banking and credit cards, money is often a largely abstract, “invisible” resource nowadays. A lack of physical cash can make it hard for children to understand that money is not an unlimited resource and appreciate the true cost of items.
A recent US survey found that while more than two-thirds of respondents were hesitant to talk about money with their children, the children of parents who spoke to them about money at least once a week were more likely to display good judgement in this area.
The reluctance of adults to talk about weighty financial issues with children is understandable, especially if the family exists on a lower income or tight budget.
Parents need not be discouraged from candidly talking about money with their children as this practice can endow young people with a more nuanced appreciation of the concepts of hard work, effort and value.
“Financial hardship – living on a limited income and going without – can be just as useful in shaping financial understandings as the experience of growing up rich,” says Sawatzki.
“The experience of financial hardship is not lost on children… children for whom money is a limited resource bring valuable insights to their financial literacy education at school. There are ways that parents and teachers can sensitively tap into these insights during lessons.”
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3. Encourage children to contribute to the household
A constructive way to get children interested in money is implementing opportunities for them to contribute at home.
The decision to grant pocket money is highly subjective; however, it can provide a means for parents to start a conversation about what their child plans to do with their money.
While many parents believe that children should help with family chores regardless of allowance, a useful way to encourage hard work in your children can be gifting them an additional allowance or reward in exchange for taking on household tasks that require more effort or consistency (such as walking the dog every day for two weeks or mowing the lawn).
When children feel they have earned their allowance – as opposed to being given pocket money for doing nothing – it can give them a more meaningful sense of pride for their achievement.
4. Guide your children to set individual goals
Getting your child excited about working towards a goal, and helping them track progress via a chart or savings jar, gives them the intrinsic motivation to practise delayed gratification and start thinking critically about saving and spending money.
For example, with younger children, parents can talk to their child about how their allowance may be put aside and counted until they have enough cash to buy a much-coveted toy.
For teenagers, parents can emphasise the importance of part-time work to encourage independence and provide incentives for them to reach their goals, such as committing to driving lessons if your teenager is saving for their first car.
5. Foster independence in your children
The Canadian government has focused heavily on improving the financial literacy of its citizens. Media outlets recently reported Ontario school children would have mandatory financial literacy lessons incorporated into their curriculum to equip them with the life skills to achieve financial autonomy in adulthood.
In addition to guiding your children to set financial benchmarks and taking an interest in their goals, don’t be tempted to always bail them out when they come across a setback – their creative and critical thinking often kicks in when things don’t go exactly to plan.
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