Recently, Drew Cratchley, a journalist at Sydney Morning Herald, mentioned that as a result of the financial crisis, the relationship between parents and Generation Y in relation to money, has suddenly changed. According to Drew Cratchley, parents now need the GenYs to “stand on their own two feet”, and suddenly they “wish their children were more responsible with their money”.
This is the reality of life. Not all is plain-sailing. Financial management is a life strategy that parents need to teach their children. The younger the better – though it is never too late to start.
Many parents think that it is okay to just give their children money without discussing with them how to budget, save and plan. Some parents think that in order to teach their kids about work and money they need to pay them for every chore they do in the house. In such cases, children may learn that if they want more money they can do more chores. If they need money, they frantically do every little chore and then when there is less need for money they forget about chores.
Children need to learn that they need to do some things without the expectation of being paid: for instance house chores. House chores need be shared by those living under the same roof. Without chores children are robbed of an important life skill; household management.
A parent who is generous with money should help their child learn financial management. There is nothing wrong with giving pocket money but children should be taught budgeting. If children earn money for odd-jobs they learn about different streams of income and the value of one type of work in relation to another in terms of both enjoyment and income. They also learn that there are trade-offs to be made.
So where does one start? Here are some great ways to engage children in a learning process by involving them in their own finances.
o Keep track of all income and expenses and review the list once a fortnight to see how the money comes in and out. Include pocket money, presents, daily lunch money and any other expenses for which you want to make them aware, such as clothes and stationary spent for school. You could also encourage responsibility for expenses by incorporating a symbolic cost (percentage) of the gas, water and electricity bills in your calculations. This way they see from month to month how their consumption affects their budget.o Discuss with them about how they could create income – ensure that the time involved in creating income doesn’t affect their need for sleep, studies, recreation or relaxation. Address how to balance all these aspects. o Discuss with them the two types of savings – firstly, saving for something they know in advance they want and secondly, saving for a ‘rainy day’. Have them keep track of these regular savings.
o Progress towards a point where your child is responsible and financially independent from you, the parent.
Catherine Varga – Copyright 2010-2014