One of the questions I’m asked most — not just by parents but by TV and radio hosts trying to help them — is how on earth to teach kids nowadays about money?
And I use the phrase “kids nowadays” with nothing but sympathy.
We had it comparatively easy. The oldest of us received our salary in cash in an envelope. The funds were doled out around the dinner table until it was gone. Every other purchase had to wait.
Credit cards only became broadly available in the 1980s so — happy days — it was almost impossible to spend more than you earned.
Fast forward to today and money has become a formless, nebulous, seemingly endless thing.
So what answer do I give about the kids? Are accounts, apps, jars or stars the best way to promote the best life for your littlieslittlies? All four… and one more.
This is now a minefield of under-paying and over-promoting. Analysis of 46 savings accounts for Money by data house mozo reveals the big banks penalise small savers by paying up to 1.7 percentage points less in interest, which significantly diminishes their real-life demonstration of the magic of compounding.
They could instead earn up to 4 per cent with smaller institutions, such as Greater Bank, Newcastle Permanent, bcu, CUA and Endeavour.
What’s more, I believe the big four banks implicitly send a damaging money message
Mo found these accounts wipe away the bulk of the sub-standard interest any month a withdrawal is made, which means ticking off a precious savings target incurs an additional cost.
My modelling reveals taking up the cheapest credit card, personal loan and mortgage, instead of sticking with the big four banks, saves the average Aussie $134,000 in interest.
Although few realise that financial capability has been embedded in the Australian curriculum since 2015, I’m betting the term “shop around” is rarely mentioned. Which is why education needs to come — regularly — from you.
With money somewhat invisible and little lives all about the virtual, embrace technology. I find apps most useful for pocket money and like Rooster Money for kids as young as four.
But backing up, how much pocket money? Rooster Money’s analysis of 10,000 of its youth users found the average was $475 in 2018, or $9.08 a week.
And — go kids! — they saved 44 per cent of it, compared with just 2.4 per cent for adults.
You can pay in pocket money and set up multiple goals (with pictures of the longed-for Lego, phone, etcetera), as a great way to establish the strong motivation we need to delay gratification.
Just be sure that it is earned, not expected, as a work ethic is also a life-changing parent charge.
Finally, use the pocket money process to instil two more principles in your progeny: any money needs additionally to look after your family and your "future self".
Mean Mum that I am, last year I forced my small children to use their own funds to buy us (cheap!) Christmas presents and, thanks to a 10-per-cent-always-stashed stipulation, Miss Six has $28 for her first (pink) car.
Nothing beats squeezing notes or coins into a clear jar for a feeling of savings satisfaction… or conveying the concept crucial to your mini-me: Money is real, even if you can’t usually see it, which is why it always runs out.
Children love recognition of their effort… and, smaller ones, stars. So use this for a final bit of finance education.
We award “bonus stars” worth $5 and stuck on a dedicated chart on the fridge, for family input that’s above and beyond. This is akin to an adult windfall and elicits sheer joy.
The money can either be added to the children’s Rooster Money goal tallies, or simply accrued for an extra treat on the school holidays.
You should use every mechanism available to teach your kids about money, its value and its power.
And talk talk talk. From the credit card and phone "tap" trap, to the ubiquity of buy now, pay later services, it is frighteningly easy for our youngest generation to learn destructive lessons – from you.
Nicole Pedersen-McKinnon delivers Smart Money Start in schools and her free 5-week S.M.A.R.T. Money Makeover videos online at themoneymentorway.com