Why financial security and delayed gratification go hand in hand
We live in an instant “buy now pay later” world. If kids adopt this mindset when they are young, they could end up with unhealthy money habits as adults.
That’s why teaching them about the benefits of delayed gratification is important. Rather than spend money to satisfy an impulse buy, saving money means they can build financial security in the future.
Delayed gratification is a vital life skill
Children are naturally impulsive. Without parental guidance, kids may blow through their pocket money. Teaching them the value of delayed gratification will help them learn how to spend their money wisely.
Let’s say your child is saving to buy a scooter and then spots a Monster Jam truck. If they don’t have enough savings to buy both, they will have to delay one of the purchases. That can be painful at the time, but it can plant an important seed. Later in life, they may sacrifice smaller purchases to save for bigger goals, such as buying a house.
As for the truck – you can explain to your child that buying it is still possible if they are willing to wait a little longer. They can add it to their wish list and save towards buying it later.
Delayed gratification can build a more secure financial future for your child
The most valuable outcome of teaching your child to adopt a delayed gratification approach towards finances is that it can build their financial security.
According to the most recent data from the Australian Bureau of Statistics, 75% of households have debt. Of those, 30% were servicing a total debt burden three or more times their annualised disposable income.
When most of your income goes towards paying debt, there’s not much left to save. Around 30% of women and 7% of men have little to no income at retirement age.
This is probably not the future you want for your child. So how can you teach them the importance of restricting spending today so they can improve their long-term financial security?
1. Lead by example.
Including your kids in family budgeting discussions can provide valuable lessons. It helps them understand your financial responsibilities and goals, and you can explain why you are making a decision not to spend money in one area.
2. Help them create a budget and set saving goals.
Many of us never learned how to manage money properly because we were not taught this skill as kids. Giving your child an allowance should go hand in hand with teaching them how to budget their money and set financial goals.
3. Give them financial tools.
Open a bank account in your child’s name so they can start to manage their money and see it grow. There are also plenty of budgeting and savings apps designed to teach kids financial literacy.
Flexischools offers the FLX App
This FLX savings app is a tool parents can use to teach kids how to earn, save and spend their pocket money. You can set automatic weekly or monthly allowance transfers, track their transactions, and help them adjust their spending behaviour to increase their savings.
If you’d like to learn more about FLX, head here.
This is general advice. Read the PDSs & TMDs at www.flexischools.com.au/legal before deciding if FLX is right for you. The FLX Services & Flexischools are provided by InLoop Pty Ltd ABN 27 114 508 771 AFSL 471558 (trading as Flexischools). The FLX Prepaid Mastercard is issued by EML Payment Solutions Limited ABN 30 131 436 532 AFSL 404131 pursuant to license by Mastercard Asia/Pacific Pte. Ltd.