Children and financial-intelligence

One of the concerns parents may have centre's around how their children will manage their money later in life; A legitimate concern in a society focused on consumerism and credit.

Reports show the median wealth across Australian's is the highest in the world, or so we're lead to believe, which bodes well and means future-life for young people could be financially-easier provided they know how to manage money. I believe this should begin early and whilst I'm not a parent, I was a child whose parents managed the little money they had well and who instilled good money-habits and a respect for all money, earned and gifted, and a need over want ethos.

Teaching young people good money-habits begins quite simply: Be a great role-model to them. Doing rather than telling is a key factor I believe.

The way a parent manages money, the household finances and spending habits, will have an affect on the young members of the family, positive or negative. Children are always watching parents and a little effort, some dialogue and demonstration around money is easy to do. It may be as simple as explaining why you're considering price across two like or similar items for instance. Constant commentary and good examples of financial-intelligence will leave children with a good platform from which to launch their own lives.

It's ok to tell children that a particular thing cannot be afforded. Admitting that something is out of reach financially these days is somehow, but wrongly, linked to self-worth.

Spending to keep up appearances is a fools errand and this habit should be avoided. Denying your children certain things you are unable to afford won't harm them, in fact, it will have a positive effect generally allowing them to understand that trying to impress others with expensive items is not going to assist in achieving their financial goals. Lesson's like this can stay with children and have a huge impact later in life. Remember, the dialogue around your financial decisions though. src

Managing finances and money requires mathematics also; Not my strongest attribute. Still, ensuring kids have a good understanding of math, not just adding, multiplication and subtracting but percentages also, will assist them to manage their money better. This sounds fundamental however it's amazing how many people miss glaring errors or opportunities through the failure to perform basic mathematic tasks.

Further to that is reading, the ability to do so. Yes, I know it may sound ridiculous however the literacy rate in society is dropping alarmingly. At some stage children will be faced with contracts which impose stringent financial and legal obligations and literacy is critical in understanding them, the contractual obligations and implications and in deciding to sign them or not. Lol, Omg, Brb and other terminology common in a text message and on social media will not appear in any of those contracts, but financial terminology will. A little time spent reading with children is a good investment in their financial future.

Don't lock all of their money away, sure it may save it, however allowing them to make financial mistakes with smaller amounts can teach valuable lessons. An opportunity to spend will also bring an opportunity to save! Allowing a young child to blow a small amount on candy, only to leave them short for the video game they want, (or money in the bank), later can be a good teacher...As is regret. Many young people's first major purchase is a vehicle and you want them to make that purchase wisely rather than with a questionable finance deal. Those expensive clothes they quickly grow out of can be a great motivator to make a better decision next time.

Instill a quality over quantity ethos where possible. Most cheaper items are inferior, that's why they're cheap. In today's society having more seems to trump having quality however if you can instill an appreciation for quality items over many cheaper ones it can be an understanding that sticks. Of course this goes hand in hand with the need over want situation mentioned above. Do they need 37 different pairs of runners? Do you need 113 different handbags? I know, some will say yes, but really the answer is no. Remember, good examples go a long way towards building good habits.

I've mentioned the importance of financial-dialogue and in my opinion that should include household income - When the children are old enough to do so of course. Discussions around your own income are a good way to deliver particular lessons also. If you don't earn a good income explain why; Maybe you didn't have the opportunity to study, build skills or gain the best qualifications. If you earn a good income also explain why and what steps brought you to earn that income. Demonstrate a parallel between work and your income, any income really, it can be useful in this age of credit cards and easy finance. Explaining the process around how your income translates to expenses, mortgage the new vehicle, family holidays and retirement for example will also get their young minds thinking.

I'm sure there's many other concepts one could employ to instill some good financial-intelligence in children, and leaving them with questioning minds so that they begin to seek their own understanding. Above is just a few that I recall my parents using.

Our household was not a well-off one and my allowance for chores was 0.50 cents a week up until I was 10 (1980) and then rose to $2.00. At the age of 14 I began work collecting shopping trolleys (carts) at the local supermarket and from the week I began earning I began paying my parents board. I earned $50 a week after school and on the weekend and paid $20 to my parents each week. At 15 I went to a larger supermarket, gained $100 a week and I paid $40 to my parents. I also began saving money from that point. Those good habits endured.

I was out of home by the age of 17 and a half. Had just met the girl I would marry and we began living together immediately. Now, thirty two years later we are still together and reaping the rewards of good financial decisions; These decisions were possible, in part, to the grounding both of us had from our respective parents.

We don't go without much these days. We have hobbies, a nice home, vehicles, overseas and domestic holidays, investments, savings and a reasonable plan for our financial security later life. The good examples from our parents have contributed to our position and despite not having children to benefit from our own good examples we try to assist those around us to make better decisions.

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