Parents have the power to equip their children with the tools they need to be financially savvy. But it’s vital to start from a young age…
As a parent, you want to give your children every opportunity in life, and that undoubtedly starts with the best education you can offer them. Doing well in school, and pursuing a qualification and job will provide the means for independence and financial freedom, but no matter how qualified or well paid, all that hard work will come to nought if your children can’t manage their money.
Start sensitising your little ones as early as possible to the cost of essential household expenses. Take them along when you do your monthly grocery shopping and contextualise how much you pay for food in terms that they can understand. For instance, if you pay R200 for meat, tell them you could buy roughly 40 packets of chips with the same amount. This will help to teach your children the value of money and the importance of prioritising spending based on one’s liabilities.
Depending on their age, says René Roux from Sanlam, you could even discuss your household budget with them. Show them how much income you have and what your total expenses are. This will show them how important it is to cover the household expenses first before you can purchase nice-to-have items.
It is also a good idea to explain to them what your priorities are, and why you deem them priorities. “Some ‘intangible’ expenses without any apparent immediate benefit, such as retirement savings and risk cover, may seem strange to them. Take the time to explain what these are and why you are spending money on them,” says Roux.
Give them the opportunity to handle their own money as soon as you consider them responsible enough to do so. Whether they receive pocket money for household chores, or earn money doing odd jobs for you or your neighbours, teach them to be disciplined with their earnings. Get a piggy bank or take them to the bank to set up a savings account. Then make sure they live within their “means”. Try not to get into the habit of supplementing their savings when they run out of money. “It’s important for kids to learn early on that they cannot expect a bottomless source of income, or depend on someone always being around to bail them out if they spend all their money,” says Roux. “It may seem harsh, but a little disappointment now is infinitely better for them than struggling financially when they are adults.”
Once they have a clearer understanding of the value of money, get them into the habit of saving. Balance occasional indulgences – they should spoil themselves every now and then – with the need to plan for the future. “If your little ones have their hearts set on something they can’t afford right now, show them that putting away a little every week or month will ultimately make it possible for them to buy it,” says Roux. “Not only will it give them a sense of achievement, but they will also appreciate whatever they purchased even more because they had to make sacrifices to get it.”
Actions speak louder than words. Your little ones will learn as much from what you do as what you say, in some cases even more so. Demonstrating a healthy attitude to money, being responsible when it comes to expenses and debt, and teaching them the importance of making provision for unforeseen circumstances, will go a long way towards ensuring a good grounding. “Showing them that you make concessions yourself to ensure that your family will have a good life – even when you are no longer there – will instil important values in them from a young age. This will serve them well throughout their lives, regardless of their financial situation.”