Why it’s vital to talk to the kids about money

WITH Michelle BALTAZAR

Editor-in-Chief • Money magazine

It makes sense to talk to your children about money, particularly with rising costof-living pressures.

But it can be a complicated and emotional topic.

Around half of parents don’t speak about money with their kids, according to the CommBank Household Spending Intentions (HSI) index.

One reason, say those in the survey, is that money is too tight in their household.

There’s plenty of anxiety, with one in four people with a mortgage worrying about how to pay it and 52% of Australians feeling more stressed about their finances than they were a year ago, according to Salvation Army research.

As well, 40% of parents admit that their knowledge of financial topics is limited.

But talking about how money is limited can give children an understanding of how the household finances work and can be beneficial, says Yish Koh, managing director of Kit, a pocket money app for kids that is owned by the Commonwealth Bank.

Koh says parents are the most important influence when it comes to money.

Dangers of social media

Hearing how to carefully navigate the finances from a trusted source, rather than via social media, is crucial.

The messages from social media can set kids up for unrealistic aspirations and reckless behaviour.

After all, kids aged six to 13 spend on average 16 hours on the internet each week, according to Roy Morgan’s Young Australian Survey.

About three-quarters of parents are concerned about the influence of online games on their children’s attitudes to money, particularly ones that encourage spending.

Around a third of kids aspire to earn money as a social media or gaming influencer.

One in five showed an interest in cryptocurrency and non-fungible tokens (NFTs) and almost a third (31%) say they want to learn more about online gaming currency and in-app purchases.

Poor financial literacy

Half of the parents interviewed claim their kids’ financial literacy is average, poor or terrible.

Only one in five rates it as excellent, with the ability to budget (57%), how to save (56%) and how to prioritise spending (55%) being key areas for improvement.

Parents have a vested interest in their kids managing and saving money well.

You don’t want to be propping your kids up with financial help as you grow older.

All kids are different and there isn’t one right way to teach them about money, says Koh.

Explain how it all works

One parent who is determined to make her three kids responsible with money is Caroline Hamilton, who likes to introduce conversations about money in everyday settings.

As a single mum with a mortgage, Caroline says her three kids – Maggi, 13, Zara, 12 and Ted, 8 – need to understand the value of money and realise they need to watch their budget. She explains about money coming into the family and where it is spent.

“It’s really important to me that we live within our means,” says Hamilton.

For example, when the kids ask for a treat from the icecream van, she points out that, alternatively, they could buy a box from the supermarket and have ice-creams for a week for the same amount of money.

Her kids love having long showers and she’ll let them know the expense of taking a long shower, not to mention the environmental consequences.

“It’s gotten easier as they’ve gotten older, to be able to have those age-appropriate conversations around money,” says Hamilton.