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FINANCE: Positive role models

Generally speaking, we Australians are pretty financially savvy, that is, we understand the how and why of effectively managing our money. 

Unfortunately, that does not mean we are actually putting that know-how into practise and making astute financial decisions.

Australian Bureau of Statistics, ABS, revealed the average Australian household debt had risen by 7.3 percent, more than $260,000 in the 2021-22 financial year. 

As of July 2023, Australians were paying $18.4 billion in credit card interest every year.

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As parents, we are role models, integral to shaping our children’s values and beliefs. Like little sponges, they absorb our behavioural patterns, pick up on signals and mimic our actions.

For us to replace bad money habits with good ones might be a big ask, particularly as they have evolved over the course of our lives. But the trouble is, kids are a cluey bunch, eager to learn from us, and not surprisingly, our money habits are among many characteristics we unintentionally pass onto them.

Of course, we all want the best for our children. But in this busy world, we are pulled in so many directions at once that sometimes it is all we can do to juggle our daily work, family, school and social lives. 

Who has time to consider the inadvertent messages we could be giving out?

Yet, when it comes to ensuring our children are equipped to build themselves a secure financial future, it’s worth the effort, right?

The points below show a list of good and bad money habits that are commonly passed onto children.

• Poor money habit: Impulse buying

We regularly make spur-of-the-moment purchases. Additionally, we tend to indulge our kids – we want them to be happy. Impulsive or indulgent behaviour can inadvertently foster in children an attitude of instant gratification, normalising impulse buying.

• Good money habit: Lead by example

As a family, we discuss the difference between needs and wants. We encourage our kids to wait for things they want, and suggest delaying a purchase can lead to smarter choices and savings. 
• Poor money habit: Not budgeting

We do not have a household budget, preferring to manage our money as it comes in. Not budgeting can engender a culture of living pay-to-pay and children can grow up not understanding the importance of tracking spending and living within their means.

• Good money habit: Family budget

We involve our children in creating and monitoring our household budget. We discuss decisions about allocating money for different purposes so that when our kids receive pocket money or gift money, they can practise budgeting by setting amounts aside for saving, spending, etc.

• Poor money habit: Credit card misuse

We rarely use cash; using a card is fast and convenient. Although occasionally we max the card out, we make sure we pay off as much as we can every month. Cards, while useful, can cause children to perceive them as a source of unlimited money.

• Good money habit: No free money

We have taught our children how to read our card statements. They know how to check purchases against receipts and understand how interest adds to the card balance. 

• Poor money habit: Not saving

We have never set up a structured savings plan so have little-to-no savings. We’d like to take a holiday or have a nestegg for emergencies, but there never seems to be any money left over at the end of the pay cycle. Children seeing parents struggling to save might not learn the value of saving or setting goals.

• Good money habit: Set goals, save

We stick to our budget and always try to allocate a portion of income towards savings, and encourage our kids to do the same. 

As parents we have a limited opportunity to equip our children with tools such as knowledge, confidence and forward planning skills – before they decide they know more than us.

So, by modelling good financial behaviour ourselves, we can instil the habits that will set our children up for a life of financial freedom.

I do not know about you, but if I can achieve that, I will know that I have done what I can to enable the next generation to succeed and thrive.

What a legacy.

• The information provided in this article is general in nature only and does not constitute personal financial advice.

The entire March 27, 2024 edition of The Weekly Advertiser is available online. READ IT HERE!

The entire March 27, 2024 edition of AgLife is available online. READ IT HERE!