Father and daughter, Bella and Jim Buda, with Bella’s daughter, Ruby. Photo: Janie Barrett Simon Clifford’s children, 12-year-old Angus and 10-year-old Olivia, started receiving pocket money from about age 5. Photo: Quentin Jones
Bella Buda has many reasons for wishing her father a happy Father’s Day.
Her father has not only provided the money to get her cafe, the Market Lane in Sydney’s Manly, off the ground but also helps her with ideas for the business.
“He gives me ideas but he’s not controlling and when I have an idea he will back me 100 per cent,” says the 25-year-old.
Her father, Jim, works for himself as an architect and has his office above his daughter’s cafe.
Four years ago, Jim saw that the space below would be ideal for a cafe and suggested the idea to Bella.
Jim didn’t take specific steps to teach his three children about money; in fact, he says he’s been a bit “delinquent” in that regard.
“I thought it was more important for them to think independently and be resourceful,” Jim says. “Being self-employed, you see the highs and the lows and the kids probably picked up on that.”
Bella has an 8-month-old daughter, Ruby, with her Brazilian-born husband.
The couple’s goals include buying a home and to be able to afford to travel to Brazil once a year.
The couple is receiving advice from a certified financial planner on how to grow business and achieve the couple’s financial goals.
“Financial planners can help you understand what you’re capable of,” Bella says. “In our first year of opening we thought we’d reached our peak, but now, four years later, we still want to build it up; we want to open at nights and are working on how to do that.” Family influence
The role of parents in determining how children relate to money is strong, says Mark McCrindle, a social researcher who has his own consultancy, McCrindle Research.
“They see their parents’ attitudes to spending and saving every day,” he says.
In fact, the influence is even longer lived today and extends into adulthood as more young people stay in the parental home well into their 20s,” McCrindle says.
It’s not just about dads. Research from the United States suggests the mother’s level of education is the most important factor in forming children’s money habits.
Divna Haslam, senior research fellow at the University of Queensland’s School of Psychology, says young adults whose mothers have higher education tend to have better financial literacy than those whose mothers are not so well educated.
The education levels of fathers do not have as much effect on the financial literacy levels of their children, according to the research.
Dr Haslam, a clinical psychologist and family researcher, says financial literacy in young adults is important because it affects financial behaviour. Low financial literacy is associated with higher debt and less retirement planning, among other things.
The research suggests children’s later success and upward mobility in life is influenced by parents’ income, education, marital stability and where they live. It’s what social researchers call the “birth lottery”.
However, the research also shows that children from less advantaged families can overcome some of the negative effects of the birth lottery if their parents teach them about money.
Dr Haslam says the effects of learning about money are significant over and above the effects of the birth lottery.
“This suggests children from disadvantaged homes who are taught basic financial concepts may do as well as those children who are winners in the birth lottery but do not have good money habits,” she says. Knowledge gap for parents
The problem is many parents are not financially literate themselves so cannot pass on their skills to their children.
In the latest of survey of the financial attitudes and behaviour of adults commissioned by the Australian Securities and Investments Commission, only one in three said that they understood the “risk/return trade-off” – that higher investment returns comes with higher risk.
Two out of five said they did not really understand it with just over one in four saying they had heard of the concept but did not really understand it.
The results were better for basic investing concepts such as “diversification” but still not that good – only about 40 per cent saying they understood the concept of diversification.
There also remains a gender divide with regards to money and confidence in making the big financial decisions.
Recent research by McCrindle Research for the Financial Planning Association found women were more likely than men to defer to their partner to make financial decisions.
About 17 per cent of women said they let their partner make most financial decisions while just 12 per cent of men said the same.
Dr Haslam says her “gut feeling” is that, historically, parents may have focused more on boys’ financial literacy than girls’ financial literacy. “Luckily, this seems to be changing”, she says. Proactive parenting
Simon Clifford, a father of three, takes a different approach to Jim Buda when it comes to money. As a certified financial planner by trade, Simon believes in teaching his children about money from a young age.
His children, 12-year-old Angus and 10-year-old Olivia, started receiving pocket money from about age 5.
“We started giving them pocket money equal to half their age, so that at age 5 they received $2.50 a week,” says Simon.
“I would give the change to them in all sorts of dominations and they would learn to count it and then it would go into their money boxes.”
With the shift to the cashless society, children do not see as many people using notes and coins to buy things and handling cash helps them to learn the value of money, he says.
When the children were a bit older Simon would pay them the wrong amounts and get them to check it.
Every so often the money boxes would be opened on the dining room table and the money counted and they were surprised by how much had been saved.
The children now have online accounts and the money goes into accounts directly.
Simon and his wife, Annick, have always expected the children to do some basic chores for the pocket money like tidying up their rooms and brushing their teeth.
“We have tried to instil in them the value of things they have like phones and laptops, he says.
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