Money shapes almost every aspect of adult life—from managing household budgets to saving for retirement to teaching children good financial habits. Yet many Australians enter adulthood without the financial literacy needed to make sound decisions. A 2022 survey by the Household, Income and Labour Dynamics in Australia (HILDA) survey showed that around 35% of Australians struggle with basic financial concepts like interest and inflation【1】.
This knowledge gap highlights why teaching children good financial habits from a young age is crucial. When kids learn how to budget, spend wisely, and save early, they carry these behaviours into adulthood. Parents, schools, and financial advisors all play an important role in fostering this literacy.
Why Early Financial Education Matters
Building Lifelong Good Financial Habits
Children who are exposed to money management early are more likely to develop responsible financial behaviours later. A landmark study by Cambridge University found that children form basic money habits by age 7【2】. At this age, kids already understand concepts like delayed gratification and value exchange, making it an ideal time for parents to introduce saving and budgeting.
Combating the Digital “Invisible Money” Challenge
One of the biggest differences between today’s children and previous generations is the decline of physical cash. Digital wallets, tap-and-go payments, and online shopping have created what many researchers call “invisible money”. This makes it harder for children to understand the value of money because they rarely see physical cash exchanged.
According to the Reserve Bank of Australia, cash accounted for only 13% of payments in 2022, compared to 69% in 2007【3】. For kids, this means they are growing up in an environment where money is often just a series of numbers on a screen.
Avoiding Long-Term Financial Struggles
Research by the OECD shows that young people with poor financial literacy are more likely to experience higher debt levels, low savings, and financial stress in adulthood【4】. Teaching financial concepts early is not about preparing kids to make investments at age 10, but about equipping them with habits—like budgeting and saving—that prevent these issues later.
Core Financial Skills Children Need
1. Budgeting Basics
Budgeting is the foundation of financial literacy. Teaching kids to allocate money between needs, wants, and savings helps them understand trade-offs. The “three jars method”—where kids divide pocket money into spend, save, and give jars—has been shown to improve money management habits【5】.
2. Saving and Delayed Gratification
Children who practice saving are better at resisting impulsive spending as adults. The classic Stanford Marshmallow Experiment found that kids who could delay gratification went on to achieve better financial and life outcomes【6】. Modern variations of this experiment show the same principles apply in a consumer-driven society.
3. Smart Spending
Teaching kids to compare prices, identify needs versus wants, and think critically about advertising protects them from consumer traps. According to ASIC’s MoneySmart program, teaching kids to shop around can save households hundreds of dollars per year【7】.
4. Understanding Digital Money
Because children grow up in a world of debit cards, Apple Pay, and Afterpay, it’s essential they understand how digital payments work. Without education, digital tools can encourage overspending. A Finder report found that one in five Australians use “buy now, pay later” services for essential expenses, highlighting the risks of misuse【8】.
Practical Ways Parents Can Teach Kids About Money
Use Real-Life Activities
- Pocket Money Linked to Chores
Giving pocket money in exchange for chores helps kids connect effort with income. The Financial Planning Association of Australia (FPA) recommends this approach because it mirrors the relationship between work and pay【9】. - Grocery Shopping Lessons
Involving kids in shopping—comparing prices, reading unit costs, or sticking to a shopping list—teaches real-world budgeting skills. - Savings Goals
Encourage children to set savings targets, such as buying a toy or gadget. Visual aids like savings trackers can help them see progress. - Cash Exposure Despite Digital Trends
Even if parents mainly use cards, giving kids some physical money reinforces the tangible value of spending.
Leverage Apps and Digital Tools
Several tools can help bridge the digital gap while making learning fun:
- Spriggy: An Australian app where kids get a prepaid card and parents can monitor spending and set tasks.
- Zaap: Offers a reloadable card and app to track saving goals.
- MoneySmart Teaching Resources: ASIC provides free games and resources designed for schools and parents.
These apps help children practice digital money management while still receiving parental guidance.
Role of Schools and Financial Professionals
The Need for School Integration
The 2018 OECD PISA study found that 22% of Australian 15-year-olds lacked baseline financial literacy skills【10】. While some schools incorporate money lessons, coverage is inconsistent across states. Stronger curriculum integration is necessary.
Professional Financial Advice for Families
Financial advisors can support parents by:
- Helping design age-appropriate lessons on saving, budgeting, and investing.
- Providing families with tools like financial literacy programs and interactive workshops.
- Guiding parents on setting up children’s savings accounts or investment products (such as education bonds).
The FPA highlights that families who engage professional financial advisors are more likely to raise financially literate children because they benefit from structured education【9.
Research-Backed Strategies for Parents
- Model Financial Behaviours
Children learn by observing. Research published in the Journal of Family and Economic Issues shows kids who see parents budgeting and saving are more likely to adopt similar habits【11】.
- Start Early
Since habits form by age 7, waiting until high school is too late. Early exposure, even in preschool, helps normalise money conversations.
- Encourage Questions
Making money discussions open and non-judgmental helps kids develop confidence. According to the OECD, financial confidence strongly predicts positive financial behaviours【4】.
- Involve Kids in Family Decisions
Involving children in simple decisions, like planning a family outing on a budget, makes financial concepts tangible.
Overcoming Common Challenges
Challenge: The Shift Away from Cash
Solution: Combine digital learning with physical cash experiences to reinforce value recognition.
Challenge: Peer Pressure and Consumer Culture
Solution: Teach children to set their own financial goals rather than copying peers. Tools like savings trackers encourage ownership.
Challenge: Lack of Time for Parents
Solution: Use apps that provide automated lessons or involve kids in everyday financial activities like bill-paying or online shopping.
Long-Term Benefits for Australia
If children grow up financially literate, the long-term effects include:
- Reduced household debt: Currently, Australia’s household debt-to-income ratio is among the highest in the world at 180%【12】. Educating children can reduce reliance on credit.
- Improved retirement preparedness: With superannuation being a key pillar of retirement, financially literate individuals are more likely to make voluntary contributions.
- Greater economic resilience: A financially literate population is less vulnerable to scams and economic shocks.
Conclusion
Teaching children financial habits from a young age is no longer optional; it is essential in today’s cashless economy. With digital transactions dominating daily life, kids risk growing up detached from the value of money unless parents, schools, and financial professionals step in.
Through practical, research-backed strategies—budgeting, saving goals, real-life experiences, and digital tools—families can raise financially capable children. Engaging professional financial advice ensures that lessons are structured and comprehensive, setting the foundation for a more secure financial future for the next generation of Australians.
References
- Melbourne Institute of Applied Economic and Social Research. Household, Income and Labour Dynamics in Australia (HILDA) Survey, 2022.
- Whitebread, D., & Bingham, S. (2013). Habit Formation and Learning in Young Children. University of Cambridge.
- Reserve Bank of Australia (2023). Trends in Payments, Clearing and Settlement Systems.
- OECD (2020). Financial Literacy of Adults and Youth. OECD Publishing.
- MoneySmart (ASIC). (2022). Teaching Kids About Money.
- Mischel, W. (1972). Cognitive and attentional mechanisms in delay of gratification. Journal of Personality and Social Psychology.
- ASIC MoneySmart. (2023). Smart Consumer Choices.
- Finder (2022). Buy Now Pay Later Statistics in Australia.
- Financial Planning Association of Australia (FPA). (2021). Raising Financially Literate Kids.
- OECD (2019). PISA 2018 Results: Financial Literacy in Australia.
- Shim, S., Barber, B., Card, N., Xiao, J., & Serido, J. (2010). Financial Socialization of Young Adults. Journal of Family and Economic Issues.
- Bank for International Settlements (2023). Household Debt Statistics.
