Introduction
Learn how to avoid passing bad money on to your children with expert tips from Your Future Strategy. This guide helps you avoid passing on bad money habits and sets your kids on a path to financial success.
Australian Household Spending Statistics
Generally speaking, we Australians are pretty financially savvy, that is, we understand the how and why of effectively managing our money. Unfortunately, that doesn’t mean we’re putting that know-how into practice and making astute financial decisions.
According to the Australian Bureau of Statistics (ABS), the average Australian household debt has risen by 7.3% (over $260,000) in the 2021-2022 financial year. As of July 2023, Australians were paying $18.4 billion – that’s a billion with a B – in credit card interest every year.
As parents, we’re role models, integral to shaping our children’s values and beliefs. Like little sponges, they absorb our behavioural patterns, pick up on signals and mimic our actions.
How to Replace Bad Money Habits and Teach Your Kids Financial Responsibility
For us to replace bad money habits with good ones may be a big ask, particularly as they’ve evolved throughout our lives. But the trouble is that kids are a cluey bunch, eager to learn from us, and not surprisingly, our money habits are among many characteristics we unintentionally pass onto them.
Of course, we all want the best for our children. But in this busy world, we’re pulled in so many directions at once that sometimes it’s all we can do to juggle our daily work, family, school and social lives. Who has time to consider the inadvertent messages we could be giving out?
Yet, when it comes to ensuring our children are equipped to build themselves a secure financial future, it’s worth the effort, right?
Good and Bad Money Habits: What Are You Passing On to Your Kids?
The table below shows a list of good and bad money habits that are commonly passed on to children.
| Poor money habits | Good money habits |
| Not budgeting We don’t have a household budget, preferring to manage our money as it comes in. But even though we know what bills are due we often seem to have trouble getting the money together. Sometimes we run out of money before payday. Not budgeting can engender a culture of living pay-to-pay and children can grow up not understanding the importance of tracking spending and living within their means. | Lead by example As a family, we discuss the difference between needs and wants. When we see something we want, we walk away and give ourselves a cooling-off period to determine whether we genuinely need the item. We encourage our kids to wait for things they want and suggest that delaying the purchase can lead to smarter choices and savings. When shopping we compare prices and identify items that offer better value. |
| Not budgeting We don’t have a household budget, preferring to manage our money as it comes in. But even though we know what bills are due we often seem to have trouble getting the money together. Sometimes we run out of money before pay day. Not budgeting can engender a culture of living pay-to-pay and children can grow up not understanding the importance of tracking spending and living within their means. | Family budgeting We involve our children in creating and monitoring our household budget. We discuss decisions around allocating money for different purposes so that when our kids receive pocket money or gift money, they can practise budgeting by setting amounts aside for saving, spending, etc. |
| Credit card misuse We rarely use cash; using a card is fast and convenient. Although occasionally we max the card out we make sure we pay off as much as we can every month. Some months, depending on expenses, we can’t manage the full balance. Cards, while useful, can cause children to perceive them as a source of unlimited money. | No free money We have taught our children how to read our card statements. They know how to check purchases against receipts and understand how interest adds to the card balance. We involve our kids in making card payments and explain the consequences of not paying the full balance each month. |
| Have the conversation We have always been open with our kids about household finances. We want them to understand that money needs to be earned, and if not used wisely and allocated appropriately, it can run out. We have also provided the opportunity for them to earn pocket money for doing age-appropriate household chores. | Set goals, save We stick to our budget and always try to allocate a portion of income towards savings, and encourage our kids to do the same. We get them to set short-term goals like saving for a new toy or book, and long-term goals like an outing or a larger purchase, and then help them create a savings plan to achieve their goals. We make it fun by using a visual chart to track progress and when they reach their goal, we celebrate the achievement, making a special occasion out of buying the item or attending the event. |
| Failing to discuss We never talk about money with our kids. They have a limited understanding of how money is earned and how we use it. Failing to discuss how money is earned can lead to children not grasping the concept of money as a finite resource, and appreciating its value. Widespread use of credit cards or taking cash from ATMs suggests that money is readily accessible. | Have the conversation We have always been open with our kids about the household finances. We want them to understand that money needs to be earned, and if not used wisely and allocated appropriately, it can run out. We have also provided the opportunity for them to earn pocket money for doing age-appropriate household chores. |
Conclusion
If we can make time to examine the way we view and use money and replace poor habits with good ones, we can positively influence our kids by:
- emphasising the importance of planning early in life,
- encouraging them to make informed decisions,
- empowering them to set goals and work towards achieving them.
As parents, we have a limited opportunity to equip our children with tools like, knowledge, confidence and forward-planning skills – before they decide they know more than us!
So, by modelling good financial behaviour ourselves, we can instil the habits that will set our children up for a life of financial freedom.
I don’t know about you, but if I can achieve that, I’ll know that I’ve done what I can to enable the next generation to succeed and thrive.
What a legacy!
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