Think back to when you got your first job and first dipped your toe into financial independence. Regardless of what age you started working, it’s likely the first thing you did was to spend it all.
Let’s face it; Australia would not get great grades for its ability to teach financial literacy to our younger generation.
I don’t know about you, but when I was in school, we learned all about trigonometry, which has been helpful for all the times I’ve needed to solve the missing sides and angles of a right triangle (never, right?). I don’t remember learning much, if anything, about how to manage money.
It’s time we change that narrative by sparking open, honest discussions about money and giving our youth the financial tools they need to flourish.
The need for open discussions about money
Money talk has often been cloaked in secrecy, even considered taboo in some households. In fact, studies have been done to indicate we’re more comfortable talking about our sex life than money!
This needs to change.
Parents can play an integral role in setting their children up for financial success by fostering an environment where money conversations flow freely. Open dialogue demystifies the world of finance and empowers young adults to make informed decisions.
Using positive language
As we foster an environment of open discussions around money, it’s important to remember that our language significantly impacts the subconscious beliefs and attitudes our children will develop.
Just as negativity can breed fear and anxiety, positive language can cultivate a healthy relationship with money.
Instead of saying, “We can’t afford this,” try saying, “Let’s work out how we can save for this”. Instead of referring to a “budget” you could call it your “spending plan”. These small shifts in dialogue encourage a mindset of abundance and possibility rather than scarcity. It helps young adults view financial challenges as opportunities for growth, aiding them in building a positive and proactive belief system around money.
Financial goal setting
Goals give us direction and purpose.
Whether saving for a first car, paying off a student loan, or investing in their first property, encouraging young adults to set and work towards financial goals from an early age is a great way to help them build better money habits, discipline and a future-focused mindset.
It’s equally important to celebrate milestones, no matter how small. This positive reinforcement nurtures a sense of achievement and motivation, propelling them further on their financial journey.
The essentials of a spending plan
Ever heard of the saying, “Failing to plan is planning to fail”?
That’s precisely why it’s important to keep track of your money – how much comes in, and where it ends up. Call it a budget or a spending plan, the objective is not about limiting yourself; it’s about making mindful choices and making your money work for you.
One simple process is to use the 50/30/20 rule, where 50% of your income goes towards needs, 30% towards wants, and 20% towards savings. This is a great place to start for young adults because it’s simple and gets them in the habit of saving from an early age.
Understanding and practising responsible spending
Managing your money doesn’t mean you have to miss out on the things you enjoy. It’s all about mindful spending. Needs versus wants is a timeless debate, but helping young adults understand the difference is key.
Impulse spending is something that can often sabotage your money management efforts. A great tip for young adults to help them avoid impulse spending is to implement a 48-hour waiting period for non-essential spending. This allows time to consider whether the purchase is within their budget and aligned with their financial goals and values.
We’re not just equipping our young adults with financial knowledge but empowering them to build a successful financial future.
So, let’s keep the money conversations flowing and start helping our young adults build habits that will set them up for financial success.
The narrative changes today!
The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.