Australia’s credit card debt is climbing. According to ASIC’s credit card debt clock, Australians owe a staggering combined $32 billion, equating to over $5 billion in interest. That’s nearly $4,300 debt for each credit card holder (Credit card debt clock, 2017).
The rate of Australian debt shows no signs of easing, with the generation of Australians entering adulthood inadequately prepared for a financial savvy adult life. A childhood surrounded by (very compelling) stimuli associated with our high standard of living has led to some overlooking a healthy long term relationship with money in favour of short term reward. This, combined with lack of formal financial education at school and at home, may send some bright young minds on a trajectory toward potentially costly mistakes when it comes to managing their adult finances.
As parents, it’s essential to begin instilling in your children responsible behaviours in relation to the value of money and work, rather than the value of the things you can buy with money. To get you started, we’ve compiled this list of helpful tips as a guide to help you shape your children’s future relationship with money.
Fill the gaps of your kid’s school education
It’s no surprise that budgeting isn’t part of your kid’s school curriculum. However, in addition to instilling your personal values, teaching your kids to juggle all of their bills, financial needs, and enjoy their lifestyle is a massive step towards helping them become independent.
ASIC has a comprehensive budget planner on their website which you can use to simulate living independently, saving money towards a new car, a yearly overseas holiday or even a first home—while still being able to afford many little luxuries they have taken for granted while living at home.
Encourage your kids to take a goals based approach to saving money
Many Millennials take a goals based approach in their lifestyles. This can be evidenced by their active pursuit towards wellness. Work with your kids to articulate their short term and long term goals and how much they’ll cost to achieve. Remember to make them SMART, that is:
Help your kids understand than an income is a privilege
Earning an income is a great privilege, one that a number of Australians aren’t afforded due to extenuating circumstances. In this regard, teaching your kids the value of earning an income and respecting the opportunity to do so will not only prevent them from taking it for granted, it will also help to build an honourable work ethic.
Teach your kids that not all work is paid work
Financially rewarding our children for helping around the house is a great way to teach them how to save for the things they want, and to finance donations to the causes to which they identify. However, it is equally important to encourage good citizenship at home and in the community. Indeed, doing chores and helping others without being paid is part of being a responsible adult and is a key contributor to overall happiness.
Lead by example
Above all else, the greatest favour you can pay your children when teaching them about money is to lead by example. Regardless of their age, kids watch everything that you do, even at times you weren’t paying attention. So be conscious of how responsibly you’re treating your own money and teach them what’s going on behind the scenes with your transactions.
Everyone wants their kids to enjoy happy, healthy financial futures. With these simple activities, you can be confident that you’ve helped to create a solid financial foundation in your kid’s lives.
IMPORTANT: The information on this website contains general information and does not take into account your personal objectives, financial situation or needs. We recommend that you consult a licensed Financial Adviser if you require financial advice that takes into account your personal circumstances. While every effort is made to provide accurate and complete information, Trilogy Funds Management Limited ACN 080 383 679 AFSL 261425 does not warrant or represent that the information in this newsletter is free from errors or omissions or is suitable for your intended use. Subject to any terms implied by law and which cannot be excluded, Trilogy Funds accepts no responsibility for any loss, damage, cost or expense (whether direct or indirect) incurred by you as a result of any error, omissions or misrepresentation in information. Note: All figures are in Australian dollars unless otherwise indicated.