Preventing the Transfer of Poor Financial Habits to Our Children

Broadly speaking, we Australians possess a decent understanding of financial management principles, meaning we grasp the concepts behind sound money management. However, this doesn’t imply we’re consistently applying this knowledge to make wise financial choices.

Data from the Australian Bureau of Statistics (ABS) shows a 7.3% increase in the average Australian household debt, exceeding $260,000 during the 2021-2022 fiscal year. By July 2023, Australians were found to be paying around $18.4 billion annually in credit card interest.

As parents, we play a pivotal role in moulding our children’s values and beliefs. Our kids, ever observant, tend to emulate our behaviours, including our financial habits.

Changing entrenched financial behaviours in ourselves can be challenging, especially since they’ve developed over our lifetimes. Yet, it’s crucial given children’s propensity to learn from us, and unfortunately, this includes adopting our financial habits.

We all aim to provide the best for our offspring. Nonetheless, the demands of our hectic lives often mean we overlook the indirect messages we’re sending about money management.

However, preparing our children for a financially secure future is undoubtedly a worthy endeavour. Listed below are several beneficial and detrimental financial habits that parents may pass on to their kids.

Negative financial habits include:

• Impulse Purchases: Often, we buy items on a whim, and we tend to spoil our children because we want them to be happy. This can teach them to seek immediate gratification, normalising impulse purchasing.
• Lack of Budgeting: Without a family budget, managing finances becomes a challenge, leading to potential financial shortfalls before the next payday. This habit can instil a paycheck-to-paycheck lifestyle in children, undermining the importance of budgeting and living within one’s means.
• Credit Card Mismanagement: The convenience of card payments can overshadow the discipline of cash use. Not fully paying off credit card balances can mislead children into viewing credit as an endless resource.
• Insufficient Savings: Without a structured savings strategy, families might struggle to save for vacations or emergencies, potentially teaching children undervalue savings and financial goal-setting.
• Avoiding Money Discussions: Not talking about finances can leave children with a limited understanding of money’s value and the work required to earn it. This might lead them to believe money is easily accessible.

Positive financial habits include:

• Leading by Example: Discussing needs versus wants and practising delayed gratification can teach children about making thoughtful purchases and saving.
• Inclusive Budgeting: Involving children in budget planning helps them understand money allocation and practice budgeting with their own money.
• Understanding Money is Earned: Teaching children to read statement balances and understand the implications of interest can foster a healthy respect for money management.
• Goal Setting and Saving: Adhering to a budget that includes savings teaches children the importance of setting and achieving financial goals.
• Open Financial Conversations: Keeping an open dialogue about family finances encourages children to appreciate the value of money and the importance of careful management.

By dedicating time to reflect on and adjust our financial habits, we can positively influence our children by:

• Highlighting the importance of early financial planning,
• Encouraging informed financial decisions,
• Enabling them to set and pursue financial goals.

As parents, we have a fleeting window to equip our children with essential skills such as knowledge, confidence, and the ability to plan ahead before they believe they have all the answers.

Thus, by exemplifying positive financial behaviour, we can lay the groundwork for our children’s financial independence and success.

This is not just an investment in their future; it’s a legacy we’re creating. What a remarkable achievement that would be, knowing we’ve done our utmost to prepare the next generation for prosperity and growth.