In a tap-and-go society, teaching children about the risks of interest-earning credit spending could prevent financial hardships later in life.
Against the backdrop of MPs’ inquiry into credit aimed at Australians at risk of financial hardship, credit union People’s Choice say the new school year is as good a time as any to think about making sure children can navigate the cashless economy and avoid problems later in life.
‘Not seeing money exchanged for goods can give children the idea that money is unlimited with no difference between savings and credit,’ People’s Choice Financial Planning’s Lisa Jones said.
‘It is important that children understand the cost of making purchases with borrowed funds.’
Afterpay, the ASX-listed buy-now, pay-later provider, this week told the Senate inquiry they were ‘absolutely distressed’ after an advertising campaign encouraged ‘broke’ consumers to use their service.
With the rise of this kind of spending – and an increasing amount of time-poor parents buying groceries online – children may never actually see money handled or exchanged.
Ms Jones said giving pocket money for household chores is a good way to teach children how long it takes to earn money, and how much it is actually worth.
‘This will help them understand that they can save towards a goal and that their spending decisions have repercussions,’ Ms Jones said.
And for the 40 per cent of parents who People’s Choice say think they could improve their financial management, this provides a good opportunity to learn along the way too.
Parents are advised to use an online calculator to teach young kids about credit and interest, while teenagers can benefit from apps like ASIC’s MoneySmart and TrackMySpend for learning about budgeting.
MoneySmart’s senior executive leader Laura Higgins said it’s paramount that children learn money skills early before the financial challenges of adulthood begins.
‘Giving your kids a good foundation and teaching them about money is critical for their personal development,’ Ms Higgins told AAP.
‘Showing children the basics such as how to budget, spend and save will establish good money habits for life.’