Teaching your kids about money is vital - Let us break it down
Kenosi Magosha, the head: Client Solutions Savings, says that children’s rights include the right to health and financial freedom. “The foundations for becoming a healthy adult – physically, emotionally and financially – are laid during childhood, often by observing our parents’ behaviour. Research shows that many children’s money habits like self-monitoring, are developed as early as 7 years old. By teaching your children about financial literacy from a young age, you give them a head start and a better chance of having a healthy relationship with money later on in life which can also benefit their psychological health,” she explains.
Below, Magosha highlights some age-appropriate money lessons you can teach your children that they can practise throughout their lives.
Age 3-6: Hello Money!
As a mother of two children under the age of 7, Magosha believes it is important to lay the foundation of control. She suggests teaching your children to manage their impulsivity through the robot system – a simple “stop to think before you do” concept. Giving in to all your children’s demands gives the impression that resources are limitless which can later result in them overspending and having issues with managing debt. Instead, practise delayed gratification. It is also the perfect time to kick-start saving habits and show them the benefit of compound interest as they grow.
Educational TV programmes such as Takalani Sesame are also a great way to instil the basics of financial literacy in young children in a relatable and exciting way. This year marks 20 years of partnership between Sanlam and the South African television and community programme, Takalani Sesame, which educates millions of children between the ages of 4 and 8 about literacy, numeracy, and basic life skills.
Age 6-10: Hey Big Spender!
At this age, it is time to teach your children the value of money and the concept of earning it. As the saying goes “Money doesn’t grow on trees.” To teach your children the concept of earning, help them think of ways to solve other people’s problems, for example, washing cars or cleaning neighbours’ gardens to earn some pocket money.
Magosha explains that at this age, children also need to learn how to deal with comparisons as they start school and realise what other kids have. Introduce and reinforce the three S’s of Saving, Spending and Sharing for any allowances, gifts and money earned. A practical example: divide the money towards 1) contributing to spending on games or books 2) sharing through gifts for friends and family and 3) a savings jar, using a real jar and virtual one, for example, a bank account to help them learn to deal with tangible and virtual money. This will teach them how to manage their money, responsible spending and saving to benefit from compound interest as they grow.
Age 13-15: Creating Wealth Builders
At this age, you need to learn to let go and give your child room to test drive their finances in a safe space. Reinforce the financial habits and concepts of earning, saving, investing, sharing and spending. Give control of that bank account and access to an online profile. Keep encouraging your teenager to talk about finances and to read about money-related matters.
While they are not old enough to work in the real world, they can volunteer to learn the skills that can help them to earn money in the real world. Encourage them once again to come up with ideas on how to earn more money – babysitting, walking dogs, or selling homemade goods.
It is also important to teach your teenager about debt as they begin to earn an income. If they run out of pocket money, you could agree to help them but with clear repayment agreement so that they understand that borrowing means you are taking money from tomorrow.
Age 15-18: Preparing for the Real World
By now your almost-adult should have a solid foundation of financial literacy. However, if you have not started yet, it is not too late to start by leveraging the lessons shared above. As the high schooling years are nearing a close, it is important to land the concept that some things cost a lot of money which may require the use of debt. A good way to avoid or limit the use of debt is to plan ahead and to know what good and bad debt is. Teach them about bad debt and why it is better to save than to take out a credit card or loans for unforeseen circumstances.
By engaging in financial literacy and instilling good financial habits, you are giving your children the ability to thrive financially and weather the difficult financial times they may encounter. “It is time that we prepare our future generations for what lies ahead to ensure a more financially stable South Africa and prosperous communities”, concludes Magosha.