Teens need to get on top of money matters
SHIFTING from pocket money to pay slips as teenagers means it is never too early to future-proof hard-earned funds.
Savvy money management has never been more important for cash-strapped young Aussies finding their financial feet in the height of the pandemic, according to Financial Basics Foundation chief executive Katrina Birch.
Ms Birch said opening dialogue about smart spending with teens was crucial because they were just as active in the online shopping market as more financiallyestablished age groups.
She said our increasingly cashless society presented challenges for young spenders, such as understanding risks like overspending on impulse buys through buynow-pay later options.
“Cashless payments mean there are no barriers to what you can spend, so you have to be more conscious of it,” Ms Birch said.
“You should only use these if you have good financial practices to start with.”
Banking and finance lecturer Dr John Vaz said young people’s social media accounts had become digital marketplaces full of personalised advertisements tailored to their interests.
That’s why they needed to become critical thinkers and research their purchases before locking themselves into repayment schemes marketed as no-fuss fortnightly instalments, he said.
“Teens should avoid locking themselves into purchases that will throw them out of their depth financially,” Dr Vaz warned.
“Understand what you are signing up to pay for.”
Dr Vaz said teens needed to get on board with budgeting because taxes, phone bills and car repayments could feel like they popped up in a sneak attack when teens haven’t managed expenses on their own before.
“They understand the financial constraint of budgeting … but it needs to be thought of as more of a plan rather than a restriction,” he said.
“What they don’t understand is how to source and manage what they have available when they need it.”
Australian Securities and Investments Commission senior executive of financial capability Laura Higgins said while the pandemic might limit employment options and savings balances, learning how to budget, manage debt and save for their goals helped teens establish good money habits for life beyond lockdown.
“Saving for something you really want, like a car or a holiday, is a great way to foster financial independence, patience and goal setting abilities,” Ms Higgins said.
Ms Birch said although financial literacy was taught in Australian schools, some teens missed out because it was usually only woven into numbers-based subjects such as mathematics, economics and business.
“Schools play a really meaningful role in delivering financial education,” she said. “But teens can easily go through school without financial education.”
Mr Vaz said financial literacy skills needed to be offered at an earlier school age.
“So many teens say they wish they had learned some of these skills earlier,” he said.
A recent Household, Income and Labour Dynamics in Australia (HILDA) survey found Australians aged under 25 were the least financially literate.
That’s why both parents and schools should be working to bridge the knowledge gap in teenagers’ money smarts, Ms Birch said.
“Knowledge learned at school needs to be supported with conversations at home,” she said.
Ms Higgins said having “open conversations about money with our family and friends can build our skills and confidence”.
Parents Michelle and John Pollard are encouraging their kids, Ella, 16, and Bradley, 12, to be smart with their money.
Ms Pollard said Ella was already taking control of her finances but there was always room to save a bit more.
“When Ella gets paid, she transfers 10 per cent to a separate savings bank account,” Ms Pollard said.
“But she could also not shop online as much nor spend money on food when there’s food at home.”
Ms Birch urged teens to kickstart lifelong money management skills simply by saving more than they spent.
“Know what your income is and know what your expenses are,” she said. “It’s essential that all teens have a chance to safeguard their financial future.”