The gift of financial literacy

Financial Literacy for Kids

Today’s youngest generation is often called ‘Generation Now’ because life is on-demand, from entertainment to information. While there are many advantages to the accessibility of just about everything, one downside is that delayed gratification may become a dying art. In this climate, instilling financial values and teaching financial literacy from a young age is essential. Here, we talk to Apt Senior Financial Adviser Emily Lanciana about why it’s critical – and how you can get started.

"Building financial knowledge from an early age fosters a healthy relationship with money. It's not just about saving or spending but understanding the value of money, making informed decisions, and planning for the future,” Emily says.

She highlights that financial knowledge is so much more than ‘learning about money’; it’s a critical life skill.

“Understanding how finances work is key to success in almost every area of our lives. It’s about setting and achieving life goals. It builds a sense of responsibility and ownership, independence and forward-thinking – and knowing how to navigate finances can save your children from significant stress in their adult years,” she adds.

Begin with the basics

According to Emily, the journey to financial literacy can start as soon as your child understands the concept of money.

“Before your child starts school, you are likely introducing them to money by giving them spare change, etc. One option is to set up a simple spend/save jar system where your child can nominate what they will spend today and what they will save to use in the future.

“This is a great early introduction to saving, even when they are too young to grasp the concept fully. Clear jars work well because they can see the number of coins growing – a simple indication that they have more than last week. When your child becomes ready, you can also add a ‘donate’ jar to introduce the idea of giving back.”

Role-model and talk about good financial behaviours

Emily says that teaching financial literacy can also come down to role-modelling.

“Showing your children good savings habits can be a great way to pass on a healthy attitude to finances. Of course, you can do this in an age-appropriate way, initially talking about why you can’t buy everything they want today and later starting to be more open and vulnerable about your own savings goals as your child becomes old enough to understand.”

She adds that many of us shy away from conversations about money in front of our children; however, not talking about it can have a long-term impact.

“Of course, you don’t need to involve children in conversations about money worries or stress, but you can discuss how you decide what you spend regularly or on big-ticket items like family holidays.

“You can also talk in an age-appropriate way about the consequences of overspending, such as, ‘If we buy that today, we won’t be able to put the money away for our family holiday’. Introducing these simple mechanics and the idea that money is not infinite can set a robust foundation.”

As children enter their tween years, Emily recommends helping them set a budget.

“Once you start giving your children pocket money, showing them how to create a basic budget for what they want to buy today and what they want to save for is a fantastic life skill. Many adults still struggle with budgeting and see it as an austerity measure when it’s really about knowing what’s coming in, what’s going out and what you want to do with it to live your best life.”

Emily says it’s important to talk about money in a positive way, highlighting that, used well, it is a means to achieve your goals.

“Where you spend your money comes back to what you value. Talking about your family values and how they drive your financial decisions can set a solid foundation and help your children make financial decisions in line with their values set into adulthood.

“If the goal is saving for a house, for example, spending on short-term purchases will make it much harder to achieve. Learning that money is a tool to achieve goals and priorities is a gift in itself and can help your children think differently about money from the beginning.”

Start with cash, progress to digital

Emily says starting with physical currency is a great way to help children understand the value of money by simply seeing it.

“We know the digital nature of spending today can make it easier for adults to overspend too, so starting with cash may be best.”

However, she says, as your child reaches tween years, using an online saver account can be a great way to demonstrate the benefits of compounding interest.

“Understanding compounding interest is an important part of financial literacy, so consider introducing the concept to your children when they are ready. Seeing that the bank is giving them even small amounts of money can be a great motivator to save more.”

Build an understanding of credit and its risks

As your child enters the late tween/early teen years, transparent discussions about credit are key.

“In a world where credit is readily available with post-pay options available at checkout on most sites, it’s important to educate children about what credit is, how it can end up getting you into debt and how to use it wisely.”

Emily adds that you may want to share your own experiences with credit. For example, if you ended up in credit card debt in your younger years, don’t be afraid to talk about how it made you feel or how long it took to pay it off.

“Being vulnerable and talking about your own mistakes in an age-appropriate way can provide teens with real-world context they can connect with. Credit can be incredibly risky for young people to navigate when they first become independent, so it’s another area where knowledge helps to make the best possible life decisions. It may also encourage them to talk to you if they are unsure about a financial decision in early adulthood.”

Introducing Superannuation

Once your child starts earning a small income from a casual job, Emily says you can also start talking about superannuation.

“The minute they start receiving super, it’s crucial that they learn to value it. Our twenties can be a great time to make additional contributions to super, as many of us have fewer financial obligations, and contributions have a long time to grow.

“Talking about superannuation when your child starts earning it can set them on a path to make the most of their super – and achieve the ultimate goal of financial freedom. And that’s an incredible gift to give anyone.”

Imparting the gift of financial literacy is arguably one of the most crucial life skills a parent can give. It's about cultivating a generation that's not only financially savvy but also understands the broader implications of their financial decisions.

Emily concludes, “Financial literacy is a gift that will keep on giving, helping your children make informed decisions into adulthood, guiding their own families and living their best lives."

General advice warning

The information provided in this blog does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommend that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.