Financial literacy is one of the most important life skills a child can develop, especially in today’s rapidly evolving world. In Australia, where economic and digital complexities shape daily life, teaching kids about money management early is essential. From budgeting pocket money to understanding superannuation, these skills empower young Aussies to grow into financially confident adults.
What is Financial Literacy?
Financial literacy is the ability to make informed and effective decisions regarding money. It covers everything from saving and budgeting to investing, earning, and borrowing. It also includes understanding key financial concepts like interest, inflation, credit scores, and risk management. Equipping Aussie kids with these essential skills early on sets them on a solid path to lifelong financial wellbeing.
The Importance of Financial Literacy for Kids
Managing money effectively requires more than just knowing how to count change. It involves budgeting, emotional control to avoid impulse spending, and an understanding of how interest and debt work. According to a report by CBI Economics for GoHenry and Wilson Wright, financial literacy can boost early-career earnings by up to 28%. It also increases the likelihood of starting a business.
A Cambridge University study found that financial habits start forming as early as age seven. National Numeracy CEO Sam Sims points out that confidence with numbers is vital for everyday financial decisions—from comparing prices at Woolies to saving for a trip up the coast.
Despite its importance, financial literacy remains under-taught. Although it’s been part of the national curriculum since 2014, a London Institute of Banking and Finance study shows that 82% of young people still want more education on managing money, particularly around mortgages, pensions, loans, taxes, and credit.
Why Should Financial Literacy Be Taught in Schools?
Australia’s financial world is growing more complex, and kids need a solid foundation to keep up. As Stewart Perry of the Centre for Financial Capability explains, financial education helps build resilience, solvency, and future planning skills.
Yet, only 4 in 10 Aussie students say they’ve received some form of financial education at school. While many educators want to improve their financial literacy offerings, a packed curriculum and limited resources often get in the way. This is where external tools like GoHenry and Flareschool can fill the gap by offering fun and practical ways for kids to engage with money.
Talking to Your Kids About Money
Money chats don’t have to be heavy. Everyday situations—like grocery shopping or withdrawing cash from an ATM—are perfect chances to explain where money comes from and how it’s spent.
Louise Hill, co-founder of GoHenry, stresses the importance of letting kids practise financial decisions through real-life experiences like managing pocket money. Conversations with teenagers should evolve to cover borrowing, taxes, superannuation, and the share market.
The Benefits of Financial Literacy from a Young Age
Research shows that kids who learn about money early can be up to $70,000 richer in retirement. Louise Hill explains that financial literacy offers societal, personal, and workplace benefits by helping young people navigate life with confidence.
Key Benefits Include:
Financial Independence: Kids become less reliant on others.
Smarter Decision-Making: Helps them weigh options for spending, saving, and investing.
Debt Avoidance: A clear understanding of loans and interest helps prevent financial pitfalls.
Wealth Building: Encourages early investment and long-term savings.
Security: Prepares them for financial emergencies.
Responsibility: Teaches accountability and goal-setting.
Empowerment: Kids take charge of their financial future.
The Six Core Components of Financial Literacy
GoHenry outlines six key pillars: Earn, Spend, Save, Invest, Borrow, and Protect. Here's how Aussie kids can benefit from understanding each:
Spend
Teach kids the difference between needs and wants. Use tools like GoHenry’s Money Missions or Flareschool’s interactive content to show them how to budget. Parenting expert Tanith Carey notes that learning to prioritise spending is the foundation of smart financial choices.
Save
Saving is about setting both short- and long-term goals. Whether it’s a new scooter or a future uni course, show kids the value of delayed gratification. Financial coach Simonne Gnessen suggests framing savings as a “future gift” to motivate commitment.
Earn
Let kids earn money through chores, part-time jobs, or entrepreneurial ventures. Explain payslips and taxes so they understand how income works in the real world.
Borrow
Teach them the basics of borrowing: how credit works, why credit scores matter, and the true cost of loans. Discuss interest rates and repayment responsibilities.
Invest
Help kids grasp long-term investing. Discuss shares, compound interest, and low-risk investment tools. Use age-appropriate examples like saving for a car or a house deposit.
Protect
Show them how to avoid scams, keep personal info safe, and use secure passwords. Digital safety is key in a world where financial fraud is becoming increasingly common.
Activities to Build Financial Literacy
Give Regular Pocket Money: Let kids manage small amounts of money to build confidence.
Use Financial Apps: Platforms like GoHenry or Flareschool offer games, lessons, and quizzes.
Set Saving Goals: Help them plan for items they want.
Budgeting Practice: Use real-life scenarios like planning a birthday party or managing a weekly allowance.
Summer Jobs: Encourage teens to take on holiday jobs.
Paid Chores: Link tasks at home to small financial rewards.
Teach Through Mistakes: Discuss common errors like overspending or ignoring fees.
Common Financial Mistakes Kids Should Avoid
Spending beyond their means
Ignoring savings and emergencies
Misunderstanding debt and interest
Not reading financial product terms
Failing to plan and budget
Falling for online scams
Financial Terms Every Kid Should Know
Budget: A plan for income and expenses.
Savings: Money set aside for future use.
Interest: Money earned or paid on savings or debt.
Credit: Borrowed money to be paid later.
Debt: Money owed.
Income: Money earned from various sources.
Compound Interest: Interest on both the principal and previously earned interest.
Inflation: The rise in prices over time.
Credit Score: A number indicating creditworthiness.
Financial Risk: The chance of losing money.
How GoHenry Can Help
GoHenry’s prepaid debit card allows kids to apply what they learn in real-time. Whether it's saving for a goal or managing spending, tools like GoHenry and Flareschool help kids develop financial confidence from as early as six years old.
FAQs
1. What is financial literacy for kids?
It’s teaching kids to understand money, budgeting, saving, and investing.
2. Why is financial literacy important in Australia?
It prepares kids for real-world financial challenges early on.
3. At what age should kids start learning about money?
As early as five to seven years old, according to studies.
4. What’s the best way to teach kids about finances?
Start with everyday money talks and use apps like GoHenry or Flareschool.
5. What are the 6 key parts of financial literacy?
Earn, Spend, Save, Invest, Borrow, and Protect.
