5 Financial Lessons We Wish We’d Learned at School

I don’t know about you, but I’m constantly dismayed that schools are still not providing adequate education in financial literacy.

I’m not talking about accounting or “business studies”. I’m talking about the real-life financial skills required to successfully run a home.

I want our kids to learn how to not only meet their commitments but thrive financially — and, ideally, avoid the temptation of Buy Now, Pay Later (BNPL) services along the way!

Children will learn in their homes many of the skills and attitudes that we adults pass down. So, what are the financial lessons we wish we had learned at school?

1. How interest really works

Understanding interest is fundamental to understanding money.

Children should learn about compound interest, how interest on savings can work in your favour, and how interest on debt can work very much against you.

They should also understand the difference between the types of debt. Some debt can be used strategically, such as borrowing to invest or purchase an asset where the interest may be tax deductible (depending on your circumstances).

Then there is the other end of the spectrum — hello, credit cards!

Understanding what debt actually costs you over time is a valuable lesson.

2. How to make a realistic budget

A robust budget is where it all starts.

Knowing how much money is coming in, where it is going and what you are actually spending is one of the most important financial skills we can teach our children.

Budgeting doesn’t have to mean never having fun or spending money. In fact, a good budget should allow for both your commitments and the things you enjoy.

We’ve written about some of the unsexy strategies that can make a big difference to your finances here: https://thewealthlab.com.au/boring-financial-strategies-build-wealth/

3. The power of starting to save early

There is a lot to be said for starting early.

It’s only with age that I’ve been able to stay in my own lane and not worry about “keeping up with the Joneses”.

However, with the rise of social media and YouTube influencers, I do think young people can have an unrealistic and often unattainable view of wealth.

We see the holidays, the designer clothes, the beautiful homes and the latest gadgets — but we don’t necessarily see the debt, the financial sacrifices or the reality behind the picture.

Learning to save, set goals and understand that you don’t need to have everything immediately is an incredibly valuable financial lesson.

Which leads me to my next point…

4. Buy Now, Pay Later isn’t free money

Wish it was! 😊

Understanding services such as Zip Pay, Afterpay and other Buy Now, Pay Later providers is increasingly important for young people.

The ability to buy something today and pay for it later can make purchases feel much more affordable than they actually are.

But those smaller repayments can quickly add up — and can completely undo that otherwise robust budget.

Learning to ask, “Can I actually afford this?” rather than simply, “Can I afford the repayment?” is an important distinction.

5. Investing basics

There is so much to learn when it comes to investing, but our children don’t need to become investment experts at school.

They should, however, understand some of the basics:

• Superannuation 101
• Shares and how they work
• Diversification
• Risk versus return
• Investment time horizons
• The power of compounding
• Why starting early can make a difference

These are concepts that can help young people make better financial decisions throughout their lives.

So, how do we teach our children about money?

As a parent, caregiver or influential adult in a child’s life, we should all be having these conversations with the next generation.

One of the big things we see with our children is delayed gratification.

One is a saver and one is a spender!

The saver considers every purchase and weighs up whether it is worth it. The spender has grand ideas about what he would like to save for, however, mentally he has already spent the money before it even hits his account!

How we parent these two around money is very different.

The saver

We do encourage some thoughtful spending.

We were recently overseas and our saver was umming and ahhing about purchasing an iconic toy in London — Chip from the Jellycat range.

It was relatively expensive for what it was.

I offered to take a photo of the toy so that she had a record of it, but in the end we agreed that she should purchase it. It was pretty cool and a unique reminder of the trip.

I’m pleased to report that she is still very happy with her purchase!

The spender

With our spender, we have to put a gap between what he wants to buy and the actual purchase.

He does jobs around the property for us and walks an elderly neighbour’s dog once a week. He kindly reminded me that it was “his” money.

No denying it!

However, he wanted to purchase a $100 football game for the PlayStation. I asked that we wait three days to see if he still wished to purchase it.

In the past, this “time strategy” has saved him from making the wrong purchases for the wrong reasons.

I’m sure a lot of adults could benefit from this strategy too!

Both kids have very different attitudes to money, despite being raised in the same household.

Talk about money with your kids

Learning to talk about money with your children is invaluable.

We hope this article has given you a few pointers to start some conversations with your children.

Let them do jobs, earn money and make some decisions about what they spend and save — with your help and guidance along the way. Practice makes perfect.

Financial literacy is a life skill, and the earlier we start teaching it, the better.

As always, we’re here to help. If you have any questions, please send us an email.

General Advice Warning

The information on this website and the links have been prepared for general information purposes only and does not take into account your personal objectives, financial situation or needs. It is not intended to provide commercial, financial, investment, accounting, tax or legal advice. You should, before you make any decision regarding any information, strategies, or products mentioned in this email, consult a professional financial adviser to consider whether it is suitable and appropriate for you and your personal needs and circumstances.