Research shows that money conversations between parents and their children lead to increased financial capability and wellbeing. Why not get the conversation with these five essential finance rules to teach your teen?
We know it’s difficult to explain a financial concept to teenagers but demonstrating it with real life behaviours can really help them understand it better. These five simple financial rules of thumb build financial capability by focusing on simple and practical behaviours around planning for the use of money.
1. PAY YOURSELF FIRST
This rule focuses on the importance of paying yourself first and saving a fixed amount of all income before paying for expenses. Don’t save what’s left over after spending. Spend what’s left over after saving.
Practise this rule by setting a savings goal and always saving a percentage of all income.
2. SPEND LESS THAN YOU EARN
This rule focuses on living within your
means by setting a budget. It’s easy to be swept up in consumerism – to want every gadget or fashion item. Unfortunately, it’s also easy to access credit, including buy now, pay later schemes, which can lead to unmanageable debt.
Practise this rule by setting a budget, automating savings and establishing a plan to avoid financial stress.
3. SHOP AROUND
This rule focuses on teaching teenagers to be critical consumers by taking the time to shop around for the best price, as well as building the skills for negotiating the best price on purchases.
Practise this rule on small purchases to begin with and you’ll build the confidence and skills to get the best deal on large purchases, financial products and utilities.
4. TIME IS MONEY
This rule focuses on the importance of time and the impact of compound interest when it comes to saving money.
Practise this rule early in life and continue to save over the long term and you’ll maximise savings.
5. SLEEP ON IT
This rule focuses on restrained spending and taking the time to think about spending money on something that wasn’t budgeted for.
Practise this rule before every purchase and, before you know it, you’ll start to distinguish between needs and wants, which will help you make better purchasing/spending decisions.
Financial Basics Foundation has partnered with Suncorp to design a toolkit of practical family activities to help put the financial rules of thumb into practice: www.suncorp.com.au/learn-about/finance-for-kids
Teachers and schools can access the suite of free resources, including the ESSI Money game, which brings the financial rules of thumb to life, by registering at: www.financialbasics.org.au