Pay yourself first
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 is the story of two castles.
One castle (well a palace, really) was in London. That’d be Buckingham Palace (it has about 775 rooms including 78 bathrooms, in case you were wondering). The other castle was just as fancy but slightly smaller – the Lego version of Cinderella’s Castle (think 4080 pieces …)
So, what do they have in common? Both of these castles taught my daughter and I a valuable lesson about money and the first Rule of Thumb: PAY YOURSELF FIRST. Let me explain.
When I was 22, I was desperate to save up enough money to go to the UK with my friend Katie and stand outside the gates of Buckingham Palace. And the Lego castle? This week my 11-year-old daughter announced her dream of owning and building that Lego behemoth. With a hefty price tag of $400 and – let’s be clear - with no chance of me buying it for her, my daughter decided she would make a plan and start saving her pocket money.
What I think is interesting is that it was my trip to the UK at 22 and my daughter’s desire to save $400 which forced each of us to learn the Rule of Thumb: PAY YOURSELF FIRST.
When you have a clear financial goal in mind --- saving up for an overseas trip or a giant Lego kit or putting money aside for Christmas or school fees or whatever – the same principle remains. The moment your pocket money or pay hits your hands (or your bank account), you prioritise your savings. You pay yourself (or more accurately – your savings – first). But it’s more than that, it’s working out a timeframe and making a savings plan of how much to save each week. When I was 22, I did this with my pay, tightening my belt for eight months and spending less money on eating out while also taking on extra babysitting work. My daughter is saving her pocket money over a six-month period, doing extra jobs around the house and has convinced a few family members to contribute money to her ‘Lego Fund’ rather than buy her presents when her birthday rolls around.
By instilling a savings mindset into our kids now, down the track, as adults, they will have greater capacity to borrow from banks because of their proven saving habits. Win/win.
TIP: This week ask your child if there’s something on their wishlist. Talk through the idea of ‘pay yourself first’ and work out a savings plan together.
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