Getting buy-in from teens

How to ensure your teenagers don’t wind up financially illiterate

PARENTS, you need to start a financial boot camp for your teenagers. Why?

The latest OECD survey on teenage financial literacy has found Australian standards have fallen since 2012, with 20 per cent of teenagers now below the minimum standard of knowledge.

But before you start pointing the finger at schools, and including financial literacy in the curriculum, we should be pointing fingers at ourselves.

Numerous research shows teenagers learn virtually all of their financial knowledge by observing their parents.

Think about it, and your money habits. It’s a bit scary the kids are watching you that closely.

It’s always a fine line between including children in so-called “adult decisions” to help with their personal growth and protecting them to enjoy a stress free-childhood.

Household finances are a classic example. In the past, any discussion about money was seen as grubby, one of those taboo topics never to be discussed. It produced teenagers and young adults illprepared in simple matters of money management, which often led to some very expensive mistakes.

The key is coming up with a constructive middle ground and remembering you are the best financial tutor for your children. Naturally, how much you reveal to children depends on their age.

WHAT TO SHARE SETTING GOALS

It’s great to let children see that you’re saving for something which benefits the whole family. It could be buying a car, saving for a family holiday or even new clothes.

It’s a great life message that you can’t have everything you want without a bit of planning and sacrifice. When the goal is achieved and you’re sitting under a palm tree sipping a cocktail, remind the kids what it took to get there and wasn’t it worth the planning?

PAYING BILLS

We always laugh at the outrage from our adult children after they read the amount of tax taken out of their first payslip.

All of a sudden they realise who pays for the roads, schools and hospitals.

We would also break down the cost of an item into how many hours they’d have to work at McDonald’s (all our kids had part-time jobs at McDonald’s) to pay for it. The message really sank in.

MAKING GOOD CONSUMER CHOICES

Drag them along shopping and show that consumers have choices; that big brand names are often more expensive but not necessarily better; that supermarket prices are usually more expensive at eye level on a shelf than above or below.

Take them shopping and treat it like a field trip and pass on your canny shopping tips.

EVERYDAY FINANCIAL EXPERIENCES

Go through your online banking with the children and explain what a financial institution does, the concept of earning interest and the difference between accounts.

The same with the credit card statement. Explain that bit of plastic isn’t a money tree and it has to be paid back, often with interest.

MAKING CHARITY DONATIONS

We would always talk about making donations (not the amount but the organisations) because we wanted to show that everyone has a community responsibility to help others.

We also insisted that they donate a percentage of their pocket money to a charity of their choice.

WHAT NOT TO SHARE HOW MUCH YOU EARN

All a child wants to know is that you’re able to look after them.

They want that security. Dollar amounts are often confusing, so it’s better to avoid a figure and just say “enough to make sure we’re OK”.

LEVEL OF DEBT

A 25-year home loan is an incredibly scary prospect for any aged child, so explain the concept of debt and how to use it properly to acquire things.

But avoid talking numbers or whingeing about how long it will take to pay off.

INVESTMENTS

Wait until children are late teenagers studying business or economics at high school or show an interest in investing. It’s confusing enough for adults.

No need to talk about dollar amounts, but talk about why you bought some of your shares and what moves prices.

Then move on to explaining other investments and how they operate.

WILLS AND LIFE INSURANCE

Most children hate the thought of being alone, of losing mum or dad. So don’t even attempt to explain wills or life insurance until they’re old enough.

Just say that whoever is your executor will look after them.