As parents, one of the most valuable legacies you can leave your children is the gift of financial literacy. Providing practical, tailored advice can set your children on a path to financial stability and success.

Here are five essential financial tips to share with your children:

Importance of insurance

Insurance is a critical safety net that protects against unexpected events. Encourage your children to consider various types of insurance:

• Health Insurance: In Australia, while Medicare provides basic health coverage, private health insurance can offer additional benefits, shorter waiting times, and coverage for services not covered by Medicare.
• Income Protection Insurance: This can provide a percentage of their income if they are unable to work due to illness or injury.
• Life Insurance: Especially important if they have dependants, life insurance can provide financial support to loved ones in the event of their untimely passing.
• Home and Contents Insurance: Protects their home and belongings from damage or theft.

Managing cash flow

Effective cash flow management is the foundation of financial health. Guide your children through these steps:

• Create a spending plan: Help them create a realistic plan that includes all their regular income, essential living expenses (housing, food, utilities), savings, and an allowance for discretionary spending (entertainment, travel, hobbies).
• Emergency fund: Encourage setting aside at least three to six months’ worth of living expenses to cover unexpected costs.
• Review regularly: Advise them to review and adjust their spending plan regularly to accommodate any changes in their financial situation.

Setting and achieving financial goals

Goal setting is vital for financial success. Encourage your children to:

• Define clear goals: Whether it is saving for a house deposit, a car, or a holiday, having specific, measurable, and achievable goals can make saving easier and more motivating.
• Short, medium, and long-term goals: Help them categorise their goals to plan appropriately. Short-term goals might include saving for a holiday, while long-term goals could be saving for a home or retirement.
• Regularly review goals: Encourage them to review their goals regularly, adjusting them as needed to stay on track.

Managing and reducing debt

Debt can be a significant financial burden if not managed properly. Share these strategies for effective debt management:

• Understand different types of debt: Explain the difference between good debt (e.g., student loans, home loans) and bad debt (e.g., high-interest credit card debt and car loans).
• Prioritise high-interest debt: Advise your children to focus on paying off high-interest debt first to minimise the amount paid in interest over time.
• Avoid unnecessary debt: Encourage living within their means and using credit cards responsibly.
• Consolidate debt: If they have multiple debts, consolidating them into a single loan with a lower interest rate might be beneficial.
• Seek professional advice: If debt becomes overwhelming, suggest seeking advice from one of our financial advisers.

Understanding superannuation

Superannuation (super) is a crucial part of the Australian retirement system. Superannuation is an asset that you need to take care of, so understanding the principles outlined below is vital:

• Choosing the right fund: Advise them to research and choose a super fund with low fees and good performance.
• Investment options: Educate them on the different investment options available within super funds and the importance of choosing a fund that aligns with their risk tolerance and retirement goals.
• Super contributions: Explain the importance of making additional contributions and taking advantage of employer contributions.
• Regularly review super: Encourage them to check their super statements regularly and make sure their employer is making the correct contributions.

By instilling these financial principles in your children, you are equipping them with the tools needed to build a secure and prosperous future. Financial literacy is a lifelong journey, and the sooner they start, the better prepared they will be when navigating the complexities of the financial world.

Discussing financial literacy and practical tips with your financial adviser can help you create a roadmap that supports your children’s financial future while ensuring your own financial wellbeing remains secure. If you have a friend or family member who could benefit from personalised financial advice and literacy, please reach out to us—we’re here to help.