Crucial money lessons every parent must teach their child

Crucial money lessons every parent must teach their child

The concept of ‘living within your means’ used to be a simple way of life.

In years gone by, credit cards and personal loans were much more difficult to obtain, so there was really no other option.

Today, however, we live in a society that offers easy access to unsecured credit.

With the average Australian credit card debt hovering around $4,000, it’s obvious that many people don’t have clear and effective rules around budgeting, saving and spending.

It’s not just credit cards that are getting out of hand, store cards, personal loans, or even loans to cover a trip to the dentist are readily available.

This easy access to credit has significantly blurred the lines of money management for modern households

Developing strong financial ‘common sense’ is essential for everyone, but particularly for property investors, and passing this on to your children truly is the gift that keeps on giving

I don’t know about you, but there are dozens of life lessons I wish I’d learnt earlier, and plenty of them revolve around money.

And if I had a dollar for every time an investor told me, “I wish I’d started buying property sooner…” I’d have another property deposit ready to go!

There are several money lessons that I believe parents should share with their children, but the top ones in my view are:

Money Lesson #1: Know your personal budget

To get ahead financially, you need to know exactly how much you earn and how much you spend – on everything from bills to takeaway meals – without relying on credit to manage your cash flow month-to-month.

The only way to achieve this is with a clear, simple budget.

It doesn’t need to be too detailed, but it does need to give you an overall picture of how much is coming in, how much needs to go out to survive, and how much is leftover afterwards.

Tax Budget Finance Money

But how do you involve your children and teach them this valuable money lesson?

It can start before they’re even earning any pocket money of their own.

Children as young as four and five can understand the concepts of earning money and exchanging it for goods

Once they’re old enough to earn a few bucks for washing the car and bathing the dog, you can then start teaching them the art of saving for ‘big ticket items’.

Money Lesson #2: Spend less than you earn

Spending less than you earn is a simple yet crucial step towards reclaiming financial control.

However, because some people (perhaps most people?) don’t have a genuine understanding of their income and outgoings, this can be an impossible task to accomplish.

It’s like asking someone to travel no more than 20km between points A and B when they don’t have any idea whether either location is.

In simple terms, if your family income is $100,000 per year after tax, you should try to make sure you only spend $90,000.

The difference of $10,000 can then be used to pay off bad debts (such as credit cards) in the first instance, before being set aside to invest in your financial future

This lesson is all about empowerment, so be sure to celebrate your financial wins with your kids.

Show them your credit card statement that shows a zero balance, or have fish and chips on the beach to mark your final car payment.

The aim is to ensure they know the value of earning more than you spend.

Money Lesson #3: Develop strong savings habits

We all want the best for our children, which is why a common trap for parents is giving their kids everything they feel they missed out on growing up.

Trampoline in the backyard? 


Brand new clothes and shoes each season? 


Entitled, impatient attitude geared towards instant gratification?


It may make you feel good to give your child all the toys and gadgets they desire, but in doing so you’re not doing them any favours.

The lesson you want to demonstrate is not one of instant gratification, but one that shows how much reward comes from putting in incremental amounts of effort.

If your child patiently saves $2 per week for a few months to buy a $20 toy, how much do think they’re going to love their new prize?

And more importantly, when lessons like this are learnt young, will it encourage them to manage their money more smartly as they get older?

Money Lesson #4: Invest in appreciating assets

One of the most important lessons I believe you can teach your children is the difference between ‘good debt’ and ‘bad debt’.

In very simple terms, bad debt applies to any purchase that depreciates in value.

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