Parents may be at the forefront of money management mishaps in children, with new research from Raiz revealing that most parents teach their kids spending habits rather than savings habits.
The findings come at a time when the financial literacy of Australian children is in the spotlight after ASIC recently questioned the effectiveness of school banking programs such as Commonwealth Bank’s Dollarmites program.
The table belows displays some of the highest-rate kids savings accounts on the market:
|Provider||Total interest rate p.a.||Base interest rate p.a.||Bonus interest rate p.a.|
|Youth eSaver||3.50%||3.50%||0.00%||More details|
|Scoot's Super Saver||2.76%||2.76%||0.00%||More details|
|Junior Saver||2.60%||1.25%||1.35%||More details|
|Kids Bonus Saver||2.55%||0.15%||2.40%||More details|
|Life Saver||2.35%||0.00%||2.23%||More details|
|Scoot's Super Saver|
|Kids Bonus Saver|
*Data accurate as at 2 December 2019. Rates based on a savings balance of $1,000. Introductory bonus interest rates not included. Sorted by total interest rate, then by provider name (A-Z).
The survey of 1,000 Australians, commissioned by Raiz Invest to explore the financial literacy of children, found gaps in how Aussie parents approach educating their kids around saving and investing.
An overwhelming majority (80%) of parents said they were confident in their ability to impart financial literacy, although more than half (54%) said they were primarily on teaching their kids how to restrict spending.
Meanwhile, three out of five parents said they wouldn’t be confident teaching their kids how to invest in shares.
Mixed reviews on instilling good money habits
Despite parents saying they were confident in their ability to teach kids about money, respondents were less sure about the financial education they received from their own parents.
While one in four said they felt “adequately educated” by their parents on managing money, almost the same number (25%) said they had received little to no financial education from their parents. Around 43% also said they felt their parents could have done more to teach them good money habits.
Worryingly, the research also revealed a disparity in how parents educate boys versus girls about money. Sons were 8% more likely to report being taught money management compared to daughters.
Focus on spending rather than saving
Nearly half (54%) of Australian parents encourage their kids to save pocket money for purchases they want.
Raiz CEO George Lucas said while this helps to instil an appreciation for savings, the concept is built on purchases and may not build good financial habits in children.
“It’s common for Australians to focus on expenditures, which are important. But investing and finding the best rates for their savings are also important,” Mr Lucas said.
“Parents and schools need to realise that there are two sides to the equation, spending and savings. More time is spent on covering the spending side of the equation with topics like mortgages, personal loans, budgeting.
“Parents and schools need to be working to teach kids how to manage their finances and save before they get to the decision-making stage of how to spend their money,” Mr Lucas told Savings.com.au.
Kids learning from bad examples
But it’s not just Aussies reporting a gap in how they’re taught money management – the research found a few gaps in parent’s money habits that may be setting a bad example for their kids.
While 71% of parents said they tried to save towards their kids future, only 27% of those surveyed had a regular savings plan in place for their children. Additionally, only one in six said they had a strict savings plan for themselves and limited their spending habits according to a budget.
Growing emphasis on importance of financial literacy
It’s not all doom and gloom though. While not every Australian felt they were taught enough about money from their parents, there are signs that financial literacy is becoming more of a priority.
Those under the age of 35 are significantly more likely to report having conversations with their parents about managing their finances.
Most Australians (three out of five) believe the responsibility lies with parents when it comes to educating children about money, but they still think schools should take on a bigger role.
A whopping 75% of us believe schools aren’t doing enough to equip students with the financial skills they need as an adult.
Mr Lucas told Savings.com.au he believes financial literacy needs to be taught in schools.
“The basic principles of financial literacy should be a subject, or at the very least a topic covered in a subject and enforced by boards like the NSW Education Standards Authority. We’re doing our kids a disservice by not enforcing the value of financial education,” Mr Lucas said.
“Equipping Aussie kids with the right knowledge and tools to go out and make smart decisions is a part of life that needs to be instilled from a young age and something that educators need to be doing in conjunction with parents.”