Teaching teens about finances and money management

In the current day of credit and debit cards, internet shopping and ‘tap and go’ payments by card, phones and smartwatches, our kids are at risk of being less financially literate than generations before. 

The money lessons we learnt from our parents simply don’t apply any more. 

In 2018, the Financial Planning Association (FPA) of Australia reported three in five Australian parents believe their children will be financially worse off. The FPA identified a new generation of children and teenagers born since 2000 it calls the ‘invisible money generation’ – those aged 18 years and below for whom money is often unseen, in the form of online transactions, credit and debit cards, and ‘tap and go’. *

This generation of children native to digital finance are unlikely to reap the reward of filling a money box by parting with cold hard cash or paying in cash and receiving goods in return. 

The money lessons we learnt from our parents simply don’t apply any more. So, what can we do about it? Here’s how to get started on some money lessons for the invisible money generation.

Save for a rainy day

In our house, one of the habits we instil is saving – putting money aside, for when you really need it. Consider how you bring money to life in the age of digital saving – perhaps take your teen into a bank to deposit cash and to check the balance.  Educating teens about the saving habit will translate to the habit of having an emergency fund in adulthood, an always-there cash buffer in an interest-earning account.

Working for pay

Working in return for payment models the responsibility of working in the real world.  Encourage teens to look for odd jobs for neighbours (washing cars, walking the dog), then they can take on more responsibility like babysitting until it’s time for a part-time or casual job. Guiding your child to get a job in the “real world” creates the opportunity for money conversations about rates of pay, tax and superannuation.

Budgeting

Teaching teens how to budget sand save, as well as how to make smart spending decisions, will help them establish good money habits for life. You could start with the 50/40/10 rule - save 50 per cent, spend 40 per cent and give 10 per cent to someone else (such as a birthday present for a friend, get well flowers for a sick relative or a donation to your teen’s favourite charity). To create a budget with your teen MoneySmart's budget planner is a good place to start.

Tracking spending

Inspire your teens to be in control of their money from a young age. Banking apps are a good place to learn about paying bills and setting up transfers – some even have features such as rounding up purchases for savings. There are several budging apps available (some free, some paid). Encourage teens to have a grip on their app spending (gaming, entertainment streaming etc) and to track mobile phone usage and costs. 

Needs vs wants

Understanding the difference between needs and wants provides teens with the knowledge to make smart spending decisions in adulthood. Encourage your children to be critical about what they buy. Do this by not allowing spur of the moment purchases. If your child sees something he or she really wants to buy, delay the decision by at least 48 hours (preferably seven days) and encourage shopping around, rather than buying the first thing they see. 

You can make a difference to your teen’s financial future. Start by being a good money role model. You are one of the greatest influences on your teen’s financial habits. A great place to start is the MoneySmart website. 

* The FPA ‘Share the Dream’ report is based on research from The Curious Co obtained through a national quantitative survey of 1,003 Australian parents who have children aged between 4 and 18. The research was conducted between 13-25 June 2018. The sample is nationally representative of parents by gender, age between 4 and 18. The research was conducted between 13-25 June 2018. The sample is nationally representative of parents by gender, age and state, defined as individuals who care for children in the 2016 ABS Census.