The rising cost of living has become a part of everyday life for most Aussie adults but it’s now having a knock-on effect for our kids.
Beyond Bank recently conducted research on the effect of the cost of living for children and found that while, in most cases, pocket money had been left untouched, as many as 20 per cent of parents have had to reduce payments to their kids. A further 12 per cent indicated they now paid pocket money less frequently, while 2 per cent had to stop paying pocket money altogether.
The impact of rising home loan interest rates and inflationary pressures on the household budget has many parents now facing the unenviable task of trying to explain to their children why they’re unable to maintain the usual allowance rate.
Canstar’s Consumer Pulse Report also found inflationary pressures were dominating Australians’ financial worries, with 59 per cent of people citing the cost of groceries, rent, electricity and gas, interest rates or fuel as their number one concern for 2023.
Parents said they were also being forced into dropping the hourly rate on household chores at the same time kids might be asking for more money because the cost of what they were saving for continued to escalate.
Canstar editor-at-large Effie Zahos said that when money was tight it could be hard to know what to share with your kids about your financial situation. This is a topic Barefoot Investor Scott Pape also raised as an issue in a recent exclusive interview with Yahoo Finance.
“Talking about all money issues is essential but we need to do it without scaring our children – it’s a fine line,” Zahos said.
“The reality is that kids can be very perceptive and often pick up on things even if we don’t spell things out. When he was younger, my son used to often remind guests to switch off the bathroom lights. No doubt that was a result of me complaining about our electricity bills.”
The majority of respondents (59 per cent) in the Canstar research said that, while they didn’t want their children to become anxious or stressed, the kids should understand a little about the cost-of-living pressures the family was under.
The remaining 41 per cent were almost evenly split at opposite ends of the scale - 21 per cent thought it was extremely important to shield children from the cost-of-living pressures and they didn’t talk about it at all, while 20 per cent felt it was important for kids to know the family was finding it difficult to make ends meet and didn’t try to shield them.
Zahos said having honest money conversations with children at an appropriate level could help them become more financially savvy.
“Chat to them about your grocery budget, get them to help you look for specials online, and show them how to shop around when they are making a purchase,” she said.
“But, above all, encourage them to get into the habit of saving. When they are younger, coins in a money box can cut it but when they start school, a good suggestion is to open a savings account specifically for them.”