How to teach good money habits early in life.

7 minutes
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As a parent or a caregiver to young children, I’m assuming their physical, social, emotional, developmental, and psychological wellbeing have probably been important to you, since they were born. However, what about their financial wellbeing, has that been on your mind?

Learning about money and building good financial habits provides strong foundations to help children to succeed. A child’s financial wellbeing depends on their stage of development, their financial capability and is also influenced by their family. For example, if children watch their parents, caregivers or other influential adults try to hide financial mistakes, or worry about money-related decisions, it may lead to anxiety about money in their adult life. Conversely, sharing positive money stories, within in a family, is a way to normalise thinking about money habits.

In a 2018 OECD survey, around 9,400 15-year old Australian students were tested on their financial literacy and their ability to apply that to financial decision-making. The study was to evaluate whether these students were able to apply their financial knowledge and make decisions about money in real-life situations. Encouragingly, it found that there was no gender gap in the financial literacy of the participants. However, the study findings revealed that 80% of students in the highest quartile of socioeconomic background achieved the national proficient standard, compared to 47% of those in the lowest quartile. A further area of concern, according to the Australian Council for Educational Research in 2020, is that Australia had the largest performance difference between its highest and lowest achievers, at 349 points compared to the OECD average of 308 points.

There is a growing appreciation that preparing Australians to succeed and have a better financial future, needs to start in their early years. Doing so across the country, can help us to close the youth financial literacy performance gap between the highest and lowest achievers. Organisations across the country, including Westpac’s Davidson Institute, are helping to respond to the need to improve the financial wellbeing of Australians. The Federal Government’s National Financial Capability Strategy, identifies three behavioural areas in which Australians can be empowered to take control of their financial lives: managing money day-to day, making informed money decisions and planning for the future. The need for help is clear, as Australians’ household debt-to-income levels are amongst the highest in the world at 183.8%, as of June 2021, compared to 113% as of June 2000, according to Reserve Bank of Australia reporting.

So where to from here?

Financial capability is linked to what is seen, learned, and experienced in childhood and adolescence. The financial education that children receive from their parents or caregivers at home is crucial in shaping their future financial behaviours.

So, if you’re like me and want to shape your children’s financial future, here are some thoughts on how:

Start early. You can use day-to-day experiences like trips to the shops as an opportunity to start a conversation about how you use money. When my children were little, I would engage them at their level, playing games like running an ice cream parlour and using toy money to buy their yummy (pretend) sweet treats. As they got older, dinner table conversations were used to introduce other topics like what it takes to earn money, to have a budget, to pay bills and how to make choices about the things they want to buy.

Encouraging savings as a behaviour. Learning to save is an essential good money habit and is one that takes time and practice. Helping your child save for their short term goals like buying a new game or bike helps them learn the importance of delayed gratification, which will enable their future selves to save for their long-term goals. The money could be added to a savings account for children which is designed to help children and teens under 18 kickstart their savings.

Embracing JOMO (Joy of Missing Out). Let’s face it, instilling good money habits does not come without challenges. One reason is FOMO (fear of missing out). With sales events like Black Friday and Cyber Monday, children and indeed all Australians, will see a plethora of marketing messages. There is an antidote to this veritable bombardment of the senses with messages designed to entice people to buy more. Building JOMO, which is about focusing on feeling content with missing out on what others are doing or buying, and disconnecting is a form of self-care. For my family, reconnecting with nature or reading brings us joy. Taking the time to find your family’s JOMO is worth it to help with building good money habits.

Finding ways to earn. Having money provides the opportunity to make decisions on how to use it. So, it helps to give children the opportunity to earn so they can learn. Money could be earned from doing chores in the home or by igniting your children's spirit of entrepreneurship. For example, selling gently used toys, and other household goods is a great way for children to learn the value of money and how it can help them reach their goals. If your children are looking to learn more about how to start their own microbusiness - look no further than Youth Impact HQ, part of the Westpac Youth Impact Challenge, which offers fun, interactive, and educational content to learn about the world of entrepreneurship.

Learning about ways to grow their money. It’s important for children to understand that money is a tool to help them achieve their goals and dreams. We’ve already covered teaching how to save and considering the use of kids savings accounts. As they get older you may consider starting to talk to them about investments such as company shares and property. Showing the connections between the real world and investing can help children to begin to learn about different asset classes.

Learning to love the gift of giving. Teaching the value of giving to others can help children form kind-hearted character traits as they grow and show them that they can use their money for good.

Beyond what can be learned in the home, it’s great to see that the NSW government have introduced the opportunity for students across the state to take part in the Treasurer’s Financial Literacy Challenge to help them better understand how to manage money. The challenge activities are online and self-paced. Students are coached on how to navigate the financial costs of becoming a pet or car owner. They're encouraged to also consider other factors in addition to initial purchasing costs, such as ongoing costs and unexpected expenses, and the value of proper planning and budgeting.

Other resources available to help teach good money habits to children:

• Westpac’s Davidson Institute has these resources to help teach children about money:
          o Financial First Steps - Starting Out.
          o Financial First Steps – Working Out Work.


This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice. © Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.


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Lali Wiratunga

Lali Wiratunga believes in encouraging positive financial behaviours to boost people’s financial confidence and help organisations to deliver social impact. In 2016, Lali was recognised for creating a positive impact through Pro Bono Australia’s Impact 25. Following a career as a corporate lawyer and management consultant in the UK, he's had 17 years experience in roles across financial services in Australia. He serves in the community as a Board Director of Plate it Forward, a food-based social enterprise that drives equal opportunity through creating opportunities to employ, train and educate individuals who might otherwise be prevented from entering the workforce.

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