In today’s modern age, there’s a concerning fact that demands urgent attention: the alarming decline in financial literacy among young adults. While this term is broadly used in the monetary realm, it is essential for you to understand its core value in manifesting overall wealth.
As a skill that will lay the groundwork for your children’s future financial well-being, it is imperative that, as a parent, we engage in conversations about the essential skills that empower them to manage their wealth as they move into adulthood effectively.
Given the significance of integrating this for your children’s future success, I would suggest discussing the following:
1. Spending and saving
On average, children as young as three have already begun to grasp pecuniary concepts like spending and saving. This happens daily through simple observations, such as watching you handle money and make purchases. Showing them simple chores they can do in exchange for a small reward will further allow you to stress the importance of earning an income and allocating money for needs and wants.
2. Difference between needs and wants
Understanding the difference between needs and wants is critical for developing future financial well-being. This means recognizing needs as things such as food, water and shelter as necessities, whilst items like toys and video games fall into the category of desires or wants. Setting aside funds for needs and wants from a young age establishes the importance of basic budgeting and saving.
3. Misuse of credit
Whilst credit can be used as a valuable tool when used responsibly, misuse, especially as a young adult, can lead to long-term debt due to its ability to create reckless spending habits and trap individuals into a cycle of debt. Often, once individuals turn 18 and become eligible to access credit, banks will offer “teaser” interest rates and increase the interest rate thereafter. It is easy for young adults to feel that they are getting a competitive financial deal when, in fact, they are falling into a debt trap.
Should you require further information, please feel free to contact Peter Quinn by submitting an enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.