Spend less than you earn
17 March 2020
Rebecca Sparrow is a Suncorp Ambassador and a best-selling author, columnist, podcast host and passionate advocate for teenagers. She works closely with Suncorp and Financial Basics Foundation to champion financial literacy for young Australians. As a mother of three children, she understands the importance of talking about money with kids and the value of financial literacy education, both at school and home.
This Rule of Thumb is the one I like to call the ‘power rule’ because really, it’s all about taking control. It’s you in the driver’s seat taking active control of your money. It’s a great one to teach the kids early!
‘Spend less than you earn’ sounds obvious, right? Don’t spend more money than you’re earning. Otherwise, well, you’ll be going into debt. But it’s not always as easy as it sounds. We don’t always realise how much we’re actually spending each week – particularly on small items. But those small items – a takeaway coffee here, grabbing lunch from a drive-thru there or maybe (cough) that $600 handbag – it all adds up. And then there’s online shopping! How often have we all loaded up that online cart with items we don’t really need using money we may not have? So many people are living lifestyles they technically can’t afford.
So, what’s the answer? You take active control by creating a budget and sticking to it! Take the time to plot out how much money is coming in from wages etc (and allocate how to spend it). A spending rule works well, for example, 50/30/20: 50% for living expenses (rent, electricity, phone, food, fuel, etc) 30% for luxury items (clothing, entertainment and holidays) and 20% for savings. Kids can use the same principle to allocate their income from pocket money, part-time jobs, birthday money etc. to their spending (bus/train card, snacks, in-app purchases, etc) and saving. Disciplined budgeting builds financial security which is something every parent wants for their child.
Let’s face it. Life can be stressful enough without worrying about money. Creating a budget helps you stay in control of your financial situation. Look rich or be rich. I know which I’d rather choose! Step away from the handbags...
TIP: Help your child create their first budget! In one column write out the money they earn and in the other take a look at the things they may spend their money on each week or month. Writing out a budget helps kids realise how much they’re spending as compared to how much they’re earning. Then keep coming back weekly to check in to see if they are keeping to budget. It’s a great way to keep the conversation going about responsible money management.
We know it’s one thing to explain a financial concept to children, but demonstrating it with real life behaviours can help them understand it better. We’ve developed these worksheets to provide you with additional activities and practical examples. Get the conversation started with your children by working through these family activities together.
This content includes the views and opinions of a third-party, and does not necessarily reflect the views of Suncorp. Any advice contained in this document has been prepared without taking into account your particular objectives, financial situation or needs. For that reason, before acting on the information, you should consider the appropriateness of the information having regard to your own objectives, financial situation and needs. The information is intended to be of a general nature only. We do not accept any responsibility for any loss incurred as a result of reliance upon it – please make your own enquiries.