From student debt to new technology and landing that first job, today's young Australians are transitioning into adulthood in a world very different from the one their parents entered. While economies and societies might change, the principles of managing one's personal finances stay the same.
Most parents try to instil good money habits in their children from an early age. Eventually they outgrow piggy banks and pocket money but the opportunities to help them navigate the world of personal finance don't end with childhood.
Here are five lessons parents might consider passing on to their offspring as they make the transition to independent, financially savvy adults.
Becoming independent requires work
Even if you can afford to fully support your young adult children while they are still students, encouraging them to take on a part-time job can teach them valuable financial and life lessons. Not only will the income allow them to save for goals such as gap-year travels, but they will also learn how to make a job application and the soft skills required in the workplace.
If they are eligible for employer-paid superannuation, you could show them how to check their account, consolidate accounts if they have had more than one job, and discuss the magic of compound interest.
There are no free lunches
Today's young adults have near-instant access to credit through high-tech offerings such as payday lender apps and buy now-pay later services such as Afterpay.
The self-discipline required to manage these new forms of instant credit is a big ask, especially when many of us still have problems with old-fashioned credit. A recent ASIC report found that Australians collectively had 14 million credit cards with an outstanding balance of $45 billion. Around half a million Australians were in arrears and almost a million were dealing with persistent debt.i
If you can't convince your children to avoid the temptation posed by 'frictionless' credit, at least explain that easy money commonly involves high interest
rates and charges. If your child is determined to take out a personal loan, help them review terms and conditions and encourage them to shop around.
Good, tolerable and bad debt
Once your child is old enough to be targeted by credit providers, it's time to have the conversation about different types of debt. Talk them through how good debt is used to purchase appreciating assets such as real estate. Acceptable debt covers things such as taking out a car loan, so you have the means to get to work or study and don't need to rely on parents to chauffer you around. Bad debt is using other people's money to splurge on travel, clothes or the latest gadget.
Investing doesn't need to be time-consuming and boring
The same technology that has made it so easy to get into debt has also made it easier to start the investing habit.
In recent years, micro-investing platforms such as Raiz and Spaceship have made it simple and attractive for techsavvy
Millennials to start investing in equities. These platforms make delaying consumption near painless by, for instance, rounding up purchases to the nearest dollar then directing the 'spare change' into investments.
If your progeny is working and receiving super, you might also want to suggest they download their super fund's app, so they can monitor their financial progress on the go.
Setting goals to make dreams come true
When your young adult starts working after years of student thrift, the temptation to spend is understandable. While it's important to have fun, you can point out that setting goals and sticking to a budget in the short to medium term means they can put themselves in a position to travel the world, buy a property and maybe even retire early.
Money isn't everything but teaching your young adults how to manage it well increases the odds that they will lead the life they dream of. Even better, you won't need to erode your retirement savings bailing them out of financial trouble.