As parents we often invest a lot of energy worrying about our kids. But Effie Zahos* says a new report shows that when it comes to finances, those worries may be unfounded.
Data from Kit, a new money app for children developed by the Commonwealth Bank, shows that under-18s are really engaged with money.
Not only do 80 per cent of 6-18 year olds chat with mum or dad about money, close to seven out of ten (64 per cent) have strategies in place when they go shopping.
These youngsters ask themselves: “Do I want it? Do I need it? Should I wait until it is on sale?”, which is a lot more than many adults do.
Other results show over one in two children earn money on their own, with 74 per cent of kids saving their money, indicating an ability to plan for the future.
These findings all back the view that future generations could be pretty savvy about how they handle money.
Adult financial literacy is going backwards
Now I know a lot of people would say these are all basic steps they were taught as children, and it all sounds pretty normal.
If that sounds like you, fantastic.
But we have a real problem in Australia, where financial literacy is not part of the national curriculum.
So not all kids are getting a fair go at learning how to save and be sensible with money.
I’m also a big believer that if you think your kids are bad with money, take a look at yourself.
Children pick up many of their basic habits and attitudes to money from their parents; it’s often a case of monkey see, monkey do.
Yet many Australian adults have poor financial literacy skills themselves.
The latest HILDA survey found adults can struggle to answer basic questions about money.
Even worse, financial literacy among over-18s has gone backwards across every age group since 2016.
The HLDA report didn’t elaborate on why we’re getting worse, not better, when it comes to grasping personal finances.
But the reality is that even with the best of intentions, some parents simply don’t have the skills to nurture good money habits in their children.
Fortunately, there are some great resources available to help parents teach kids about money.
Obviously apps can be a handy starting point, and along with Kit, others choices built with kids in mind include ZAAP and the Spriggy pocket money app.
Or maybe have a chat with your child’s school about introducing financial literacy programs designed for children, like Banqer or Talk Money developed by the Ecstra Foundation (of which I’m a director).
Now…time to test how you rate
So, how does your own financial literacy stack up?
Research by comparison site Canstar (of which I am Editor-at-Large) shows 60 per cent of Australians consider themselves to be financially literate.
But when put to the test, 46 per cent failed Canstar’s new TestMyMoneyIQ quiz that assesses knowledge of basic financial concepts.
To see how your financial knowledge stacks up, here are the four questions from Canstar’s quiz that proved most challenging.
Among 1,000 adults, less than 25 per cent picked the right answers.
The correct answers are at the bottom of this page (no cheating!).
- If a credit card offers an interest-free period of 55 days that generally means that you don’t pay interest on any purchases until 55 days after you buy the item. (19 per cent answered correctly)
- A. True
- B. False
- C. I don’t know
- Jarrod wants to upgrade to a new smartphone but isn’t sure if he should buy it outright and choose a SIM separately or get the phone on a plan with a major telco. Generally, is he likely to have to pay more for the phone if he opts to combine it with a plan? (22 per cent got this one right)
- A. Yes
- B. No
- C. I don’t know
- Therese has $500 to invest in a company. Brokerage fees are $20 per trade. How much would her investment have to increase for her to break even after she sells? (24 per cent answered correctly)
- A. 4 per cent or $20
- B. 8 per cent or $40
- C. 10 per cent or $50
- D. I don’t know
- The super guarantee is the minimum percentage of earnings an employer needs to pay into an employee’s super fund. How much is that currently? (24 per cent picked the right answer)
- A. 9.5 per cent
- B. 10 per cent
- C. 10.5 per cent
- D. 11 per cent
- E. I don’t know
Answers: 1 (B), 2 (B), 3 (B), 4 (C)
*Effie Zahos, Independent Director InvestSMART
This article first appeared at investsmart.com.au
