The coronavirus pandemic exposed our society’s biggest weaknesses. Healthcare, supply chains and the way we work were all disrupted in unimaginable ways. Suddenly, people with secure jobs and stable housing found themselves unable to meet their basic needs.
Coronavirus laid bare the fact that most people are not financially prepared to deal with crisis. The lack of personal finance knowledge plunged countless millions into distress in a matter of weeks. And its not entirely their fault, either.
Financial literacy is something we all talk about but rarely impart on our youth. According to Financial Basics Foundation Chair Brigid Leishman, now is the time to make personal finance a standalone subject in high schools—especially as social media fuels a ‘buy now, worry later’ attitude.
One initiative that is starting to make a difference is the Financial Wellbeing Network, which is managed by Australia’s securities regulator and brings together practitioners, educators and policymakers who are committed to helping Australians improve their financial lives. This cross-sector platform can serve as a launchpad for further financial literacy initiatives targeting our youth.
Financial literacy is all about knowing how to manage your money. Whether it’s spending, saving or investing, a basic understanding of personal finances means making good decisions and avoiding bad ones.
Even before coronavirus, research showed that young people were running into financial trouble as soon as they leave home. According to Ms. Leishman, “less than one in four young Australians under the age of 25 have a basic level of financial understanding and literacy.”
Rather than wait for the curriculum to be updated, parents are starting to take financial literacy into their own hands. If you’d like to take a more hands on approach to your child’s financial literacy skills, here are some basics:
- Start with budgeting: Creating, maintaining and updating a monthly budget is one of the most effective ways to stay on top of your finances.
- Prioritise saving: Budgeting allows you to get a handle on how much you’re spending. Teach your kids to save a certain percentage of their income each month. If the budget doesn’t allow for saving, then expenses need to be reduced.
- Expose them to investing: Investing is all about putting our money to work. Your child might not be in position to invest their money, but they should still be exposed to the basics of how investing works.
- Understand debt and interest rates. While debt isn’t necessarily a bad thing, it can quickly ruin your finances. Your kids need to understand how debt and interest rates work so they avoid it or use it cautiously.
- Make it a team effort. There’s a way you can teach your kids responsibility and independence without forcing them to venture off on their own quite yet. Tools like Spriggy gives parents a complete view of their kids’ finances while allowing kids to set savings goals.
These are just the basics, but they can go a long way in ensuring your kids are prepared for their financial future.