Kids post unexpected results when it comes to budgeting
IF YOU'RE struggling to build savings, it could be worth asking your children for a few tips. It turns out Aussie kids are very financially savvy.
A survey by the Commonwealth Bank measured the financial awareness of Australian children aged 5-12 years. The youngsters scored an average of 63 out of a possible 100 - pipping the average score among parents by one point.
Interestingly, children from low income households (those earning less than $50,000 annually) scored almost identical results to youngsters from high income families.
The results bode well for the financial wellbeing of our next generation of adults. And it has to be said, parents deserve a pat on the back for helping their children develop money skills.
The same research confirmed two-thirds of primary school children receive pocket money, and 82% are expected to complete a few chores to earn their cash. This is a great way to help children understand that money must be earned.
Just as valuable, almost one in two children believe it is important to save for things they want.
One area where youngsters came up short was personal budgeting. This was a skill where parents scored good results, but it seems it's something we're not passing down to our children.
A simple budget can show children how to allocate pocket money across different goals like, say, buying a few treats at the school canteen, paying for hobbies, and having money left over to save.
If parents can help develop this skill, budgeting will come more naturally as their child progresses through their teens and into adulthood. At this stage budgeting becomes more critical to staying in good fiscal shape as we have to spread our money across needs rather than wants.
A number of children's savings accounts promote budgeting in a roundabout sort of way by offering bonus interest when children don't dip into their savings. These accounts can be financially rewarding, particularly if mum and dad or carers can explain how the system works in simple terms. Always look for a savings account offering decent interest and zero account keeping fees.
With the kids back at school, now is a good time to ask if your school offers a regular banking program. They can be a great way to encourage kids to save. Or check what your current bank offers for youngsters. Some provide a range of online money education tools pitched at both parents and children.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.