News - Raising future generations of financiall...
Raising future generations of financially savvy kids
Once upon a time, in the not-too-distant past, discussing money, especially with children, was considered unnecessary. In many households, topics around money were surrounded by secrecy and mystery, leaving many of us without a clear understanding and preparedness as we went into adulthood.
Talking about money, let alone involving children in these conversations, was unthinkable. It was a topic shrouded in mystery and secrecy, and as such many of us grew up with a lack of understanding and knowledge about money management.
Fast forward a few years, and times are changing as we see a shift among younger South African parents who recognise the importance of open conversation about money and are more vocal and open to talking about money matters with their kids. However, some parents are finding that an unintended consequence of these discussions is that children are developing anxiety because often, the conversations are not age appropriate.
So, to help you foster a healthy relationship between your children and money, we’ve put together this guideline to get the conversation started and instill a culture of respect towards money so that the next generation is more financially savvy.
Teach your children about money from an early age. Introduce them to the concept of saving, spending, and budgeting as soon as they’re able to understand basic concepts.
Lead by example
Children learn a lot by observing their parents' behaviour. Display responsible financial habits yourself, such as budgeting, saving, and avoiding unnecessary debt. Let them see you making wise financial decisions.
Teach the value of money
Help your children understand that money has value and is earned through work and effort. Encourage them to do age-appropriate chores and pay them for them. This will teach them the connection between work, money, and financial independence.
Set financial goals
Encourage your children to set goals for saving money. It could be for a toy they want, a special outing, or even a long-term goal like their education. This will instil the habit of planning and saving for the future.
Allow them to make financial decisions
As your children grow older, involve them in financial decision-making. Allow them to spend their own money and make choices. Let them make mistakes and use the words “I regret getting this” because this will teach them a valuable lesson about budgeting, making trade-offs, and understanding the consequences of their decisions.
Teach budgeting and saving
Teach your children the importance of budgeting by allocating a portion of their allowance for savings, spending, and giving. Help them create a simple budget and track their expenses. Encourage them to save for long-term goals, like paying towards their matric ball or a deposit for their first car.
Discuss money openly
Encourage open discussions about money at home. Answer their questions and explain financial concepts in an age-appropriate manner. This will demystify money and empower them to make informed financial decisions.
Not sure what conversations are age appropriate? Here are some guidelines so that you don’t feel overwhelmed or completely confuse your children:
You need money to buy things
Tie learning to come from 1 – 10, into money references.
Teach them that people earn money by working.
Chat about the difference between wants vs. needs
Teach about responsibility and reward and having to sometimes wait for something you want.
Start giving them pocket money – Coins vs. Notes.
Explain they have choices on how they spend their money.
Teach them to shop around and compare prices. Apply practical examples at the store and encourage to help do the shopping.
Help them open a bank account.
Expand the savings’ conversation and teach them about keeping money in their bank account for long periods, for a specific reward.
Start conversations about cash vs. credit and the importance of proper planning, so you don’t spend money you don’t have.
Teach them how to create a budget.
Teach the importance of avoiding debt and the difference between good and bad credit.
Extend the detail around earning and saving money by encouraging them to do chores around the home or for neighbours or family friends.
True financial freedom evolves through generations. It is time to ensure our children are better equipped with knowledge to make better decisions and choices as their responsibilities and earning potential increases.
Raising financially savvy children takes time, patience and consistency. But remember, by providing a solid foundation with financial knowledge and skills, we are equipping our children with essential life skills that will benefit them throughout their lives.