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The Invisible Money Generation

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Today’s kids have a different concept of money to previous generations. Instead of using coins and bank notes, this generation has grown up watching people buy things by tapping and swiping or clicking buttons online. They live in a world where in-app purchases, electronic bank transfers and digital currencies like bitcoin are as common as piggy banks were back in the day.

It’s no wonder that research from the Financial Planning Association (FPA) revealed two in three Australian parents say it’s difficult for their children to grasp the actual value of money.

DIGITAL NATIVES
Generations Z (born 1995 to 2009) and Alpha (born after 2010) are the invisible money generation – citizens of an increasingly digital world with the Internet at their fingertips. They are savvy with technology because they’ve been using it all their lives, and having ready access to all the information they want has made them more curious in matters of money and life than any previous generation.

These digital natives don’t just learn about money from their parents. They gather their information from a wide variety of sources, including grandparents (63%), teachers or coaches (59%), peers (26%) and social media (18%).

How children use digital money Ages 9-13 Ages 14-18
Make online purchases for themselves or their family 30% 68%
Buy a mobile app or in-app purchase, or a console in-game purchase 48% 66%
Transact with debit/credit card or other form of digital money 31% 65%
Make a purchase using a mobile phone 24% 44%

MORE CONFIDENT, BUT WORSE OFF
The FPA research showed parents recognise that their children are more engaged with money than they were at their age. Compared to their own childhoods, 69% of parents say their children are more confident asking questions about money and 57% feel their kids are more financially literate.

Yet, 62% of parents believe their children’s generation will be financially worse off than they were. Uncertain economic conditions and the growing cost of living play a part in this belief, but for many this fear goes beyond external influences. More than two in five parents are concerned that their kids won’t have the financial skills they will need as adults to become financially successful.

FINANCIAL STRESS AND UNCERTAINTY
It’s possible that financial stress and limited financial literacy are affecting people’s confidence when it comes to talking about money. Almost two in three young parents (aged 18-29) say they are very or somewhat stressed, while that number is closer to one in three for those aged 60 or over. People living in regional or remote areas are more likely to be financially stressed than their city-dwelling counterparts, and single parents report a much higher level of stress (67%) than those who live in two-parent households (47%).

Parents who are financially stressed are less likely to talk about money to their kids compared to those who don’t feel stressed – with 32% admitting they’re reluctant to have these conversations because they don’t want their kids to worry about money. But the FPA report revealed that children who participate in conversations about money are more curious, confident and financially literate than those who don’t – even if the conversations aren’t always positive.

WANT TO KNOW MORE?
Seeking advice from a financial adviser can build your financial literacy and confidence. If you would like to know more speak to your financial adviser.

 

Source: Colonial First State

Introducing Children to Money

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How do we educate, motivate and empower children to become regular savers and investors? Here are 15 simple ways to help educate children about personal finance and managing money:

1. As soon as children can count, introduce them to money. Observation and repetition are two important ways children learn.

2. Communicate with children as they grow about your values concerning money. How to save it, how to make it grow, and most importantly, how to spend it wisely.

3. Help children learn the differences between needs, wants, and wishes. This will prepare them for making good spending decisions in the future.

4. Setting goals is fundamental to learning the value of money and saving. Nearly every toy or other item children ask their parents to buy them can become the object of a goal-setting session. Such goal-setting helps children learn to become responsible for themselves.

5. Introduce children to the value of saving versus spending. Explain and demonstrate the concept of earning interest income on savings. Consider paying interest on money children save at home; children can help calculate the interest and see how fast money accumulates through the power of compound interest. Some parents even offer to match what children save on their own.

Allowance and Spending Decisions

6. When giving children a allowance, give them the money in denominations that encourage saving. If the amount is $5, give them 5-1-dollar coins and encourage that at least one dollar be set aside in savings.

7. Take children to a bank to open their own savings accounts. Beginning the regular savings habit early is one of the keys to savings success.

8. Keeping good records of money saved, invested, or spent is another important skill young people must learn. To make it easy, use 12 envelopes, 1 for each month, with a larger envelope to hold all the envelopes for the year. Establish this system for each child. Encourage children to place receipts from all purchases in the envelopes and keep notes on what they do with their money.

9. Use regular shopping trips as opportunities to teach children the value of money. Going to the grocery store is often a child’s first spending experience. Spending smarter at the grocery store (using coupons, shopping sales, and comparing unit prices) can save more than $1,800 a year for a family of four. When going to other stores, show them how to check for value, quality, reparability, warranty, and other consumer concerns.

10. Allow young people to make spending decisions. Whether good or poor, they will learn from their spending choices. You can then initiate an open discussion of spending pros and cons before more spending takes place. Encourage them to use common sense when buying. This means doing research before making major purchases, waiting for the right time to buy, and using the “spending-by-choice” technique. This technique involves selecting at least three other things the money could be spent on setting aside money for one of the items, and then making a choice of which item to purchase.

Buying Smart

11. Show children how to evaluate TV, radio, and print ads for products. Will a product really perform and do what the commercials say? Is a price offered truly a sale price? Are alternative products available that will do a better job, perhaps for less cost, or offer better value?

12. Alert children to the dangers of borrowing and paying interest. If you charge interest on small loans you make to them, they will learn quickly how expensive it is to rent someone else’s money for a specified period of time.

13. When using a credit card at a restaurant, take the opportunity to teach children about how credit cards work. Explain to children how to verify the charges, how to calculate the tip, and how to guard against credit card fraud.

14. Be cautious about making credit cards available to young people. Credit cards have a message: “spend!”.

15. Establish a regular schedule for family discussions about finances. This is especially helpful to younger children–it can be the time when they tote up their savings and receive interest. Other discussion topics should include the difference between cash, cheques and credit cards, wise spending habits, how to avoid the use of credit, and the advantages of saving and investment growth. With teenagers, it’s also useful to discuss what’s happening with the national and local economies, how to economise at home, and alternatives to spending money.

Source: LaTrobe Financial

Getting your personal finances under control

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Australians are typically very good at spending money, but there comes a time when many of us need to look at getting our finances under control.

This may be due to starting a family, getting a mortgage, educating children, losing a job, or a reduction in income. For some, the need to gain control of personal finances comes with the realisation that their debt has spiralled out of control, and cannot be paid off effectively.

According to American author George S. Clason in his famous book The Richest Man in Babylon there are seven ways to take control of your financial future:

PAY YOURSELF FIRST – Ideally, you should aim to save 10 per cent of everything you earn for long-term savings in case there is a period you are no longer able to work.

This money is not being saved to buy a new car, have a holiday, or even buy a house.

For some, making additional contributions to superannuation may be an ideal way of saving that extra 10 per cent. If you can’t afford to save that much, then save a smaller part of your income and gradually increase it over time. Ideally you should aim to live off 90 per cent, or less, of your income.

MANAGE EXPENSES – We all have regular expenses that need to be met in order to live including food, housing, clothing, and transport. But, many of us spend unnecessarily and it often consumes most, if not all, of our surplus income.

Start by setting a budget of your known fixed costs. Look back over past bills and identify your regular expenses. Bills often arrive at irregular intervals.

For example, a phone bill might arrive once each month (or once each quarter) but you might be paid weekly or fortnightly. Expenses should be calculated over a full year, and then divided by the number of pay days, in order to work out how much needs to be set aside out of each pay to cover bills as they arise.

GROW YOUR WEALTH – Now that you have started saving part of what you earn, you should look to having it grow in value. The investment earnings achieved should be added to your growing pool of savings.

PROTECT YOUR CAPITAL – In order to protect your savings from loss, care must be exercised to ensure the security of the principal. Before investing, understand the associated risks and, if the risk is unacceptable, look for a more suitable alternative.

Take advice from a qualified financial adviser. There are many good investment savings plans that allow small amounts to be saved on a regular basis while providing access to a wide range of investment options including fixed income, shares, property and overseas investments.

INVEST IN YOUR HOME – Eventual home ownership is the desire of many Australians, and owning your own home provides security for you and your family. Home ownership also delivers favourable tax concessions. This means that any gain achieved on the sale of your home is, generally, exempt from tax.

It therefore makes sense to maintain and improve your home, within reason and without over capitalising, to ensure you maximise the price you want to achieve when you come to sell.

PROTECT YOURSELF – We all understand how important it is to insure our possessions, but how many of us have adequate insurance on our life and our ability to earn? You should seek the advice of a qualified financial adviser to ensure that you are adequately insured against events that might rob you of your life, or your ability to earn. Yes, you can insure your future income.

INVEST IN YOURSELF – One way of building wealth is to increase your capacity to earn. To achieve this you need to be willing, irrespective of age, to increase your knowledge and skills through continuing education and training. Many people expect their employer to provide additional training. However you should take personal responsibility for increasing your knowledge and experience by investing time and money in suitable training that enhances your opportunity to increase your earnings over time.

Taking control of your financial future takes time and discipline. It will involve making some hard decisions, but if you make a plan and stick to it, over time it will become a habit and will deliver financial security and prosperity.

 

Source: Peter Kelly – Technical Advice

Centrepoint Alliance

This editorial is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Centrepoint Alliance strongly suggests that no person should act specifically on the basis of the information contained herein but should obtain appropriate professional advice based on their own circumstances.