Empty class room of elementary school

This article was first published in the first-quarter 2016 edition of Personal Finance magazine.

 

We try conscientiously to give our children skills and tools to help them fit into society, manage their lives and have the options they deserve. We preach control of time, diet, appearance, mood and manners … but what of money, which can smooth or disrupt their paths through life?

When it comes to financial matters, many of us feel ill-equipped to guide. Stressed about money ourselves – often a direct result of a lack of financial education in our own lives – we muddle through, hoping our children will do better.

Eunice Sibiya, the head of consumer education at First National Bank, says parents who hesitate to discuss money with their children usually argue that they are not financial experts and that the children are “still too young”. But Sibiya and many other commentators believe children are never too young to learn that the things they enjoy come at a cost. Underlying parents’ reticence, she believes, is a lack of confidence and a dread of passing on their mistakes.

Matthew Hunter, the head of savings and investments at Absa retail banking, agrees. “Most parents excel when it comes to teaching their kids about safety and good manners, but with money, few know where to start. Money skills can be a blind spot, because so many parents feel financially inept themselves. Yet research suggests parents’ behaviour and the example they set are the biggest influences.”

This is supported by research by the University of Cambridge on behalf of the United Kingdom’s government-funded Money Advice Service, which found that parents were by far the most important influence on the money habits of young people and that those habits are largely formed by the time children are seven years old.

 

The bigger picture

If a country’s level of savings and indebtedness is a measure of the need for financial education, South Africans have a lot of catching up to do. Henry van Deventer, the head of business development at financial services group Acsis, part of Old Mutual Wealth, says R3 out of every R4 of disposable income in South Africa is spent on debt. “If we don’t educate our kids, this is likely to get worse,” he says. “Only one in 20 South Africans can afford to retire and maintain their standard of living.”

Peter Dempsey, the chief executive officer of the Association for Savings and Investment South Africa (Asisa), says too many teenagers grow up “without any appreciation of the real value of money and the dangers of buying on credit. To them, a plastic card can buy anything they desire – so why bother saving?

“Explaining how budgeting works, why it is important to save and why it is important to be in a position to deal with unexpected events is probably one of the best legacies you can give your children. If we don’t teach them the importance of budgeting and saving before they leave home, we are creating yet another generation of adults unable to save, funding their lifestyles with debt,” Dempsey says.

Van Deventer says the generation of young people known as Generation Y, or the Millennials (born roughly between 1983 and 2000), shows very distinct traits that “make the right savings habits – and the ability to find their own financial feet – more challenging than for any other recent generation”.

Millennials aged 18 to 32, he says, live in the moment, set more store by social connectedness than job security and invest in fewer “hard assets” (homes, for example) than any previous generation at the same age. The conditions that have influenced this shift from long-term planning and commitment will also be experienced by the present generation of schoolchildren: a scarcity of jobs, the ever-present risk of retrenchment, the overwhelming importance of spending on technology, the high cost of property and utilities, and the high bar that banks set for granting credit.

On the positive side, the education system in South Africa does play a role in teaching children about money through its Economics and Management Sciences (EMC) course for grades seven to nine, which takes 12-to-15-year-olds through financial literacy and the basics of accounting, economics and entrepreneurship. The course used to start in grade four, and Keshma Patel, a grade-six teacher at Micklefield School in Cape Town, an independent primary school for girls, believes it still should. She runs a successful year-long entrepreneurship programme for her 11-to-12-year-olds, during which they identify a charity with a specific need, draw up a business plan to raise money and decide whether to give the charity all or part of the profit.

“Children find it very hard to grasp concepts like income and expenditure until they have actually run a little business,” Patel says. “When they have to do a stock-take and balance the budget, everything becomes real.”

Patel’s do-it-yourself approach to learning filters through to all the subjects she teaches. Another, shorter project emerged from a geography lesson about international trade. The class was divided into groups, with each group given a different country and required to plan a 10-day travel itinerary on an imaginary budget of R30 000. “Very soon the girls were saying ‘we can’t stay in a five-star hotel – we can’t afford to’,” Patel says. “Afterwards, the parents said their children were much more aware of what it costs to go on holiday or overseas.”

Patel has wide-ranging discussions with her class about financial issues whenever she has the opportunity. Some things they can relate to, others not …

“I was telling them that, when they get their first salary, they must put away a portion for retirement, and they all burst out laughing. Retirement is a very distant concept. But then the conversation grew and, being girls, someone said ‘we might not have to – our husbands will do it’. That prompted another to say her father had told her that sometimes, when a husband dies, his wife doesn’t know what to do about money. So he’s raising his daughters to live on their own and be self-sufficient.”

Patel believes parents shouldn’t hesitate to introduce preteens to such long-term realities. “They do want to know and learn, and they do ask questions. Children feel the pressures of the world – and they feel it younger and younger. They’ll say, ‘we have to work hard in primary school, so we can get into a good high school; we need to get into a good high school, so we can get into a good university. And we need to get into a good university to get a good job, because we need a good job to live the lives we live’. They pick up on world issues ... and they’re having more open debates in class.

“Obviously, parents shouldn’t burden them with sorting out the family’s finances, but they should make them aware. For example: ‘there are two of us working and earning money and that’s how we can afford your extramural activities’. Or: ‘having a new car would be nice and we could probably afford it, but keeping the car we have means we can plan a holiday’.” And she adds: then involve them in planning the holiday.

“It’s important for young children to realise that every family is different; everyone has different priorities and spends money on different things. And that’s okay; we don’t need to have and want the same things,” she says.

So, given that every family is unique, what can most parents do to help their children make money work for them, instead of the other way round?

 

Wants are different from needs

Distinguishing wants from needs usually starts (very young) by hearing the word “no” – most parents’ short answer to requests that fall squarely into the “wants” category. There used to be a feeling that “no” should be enough and children should accept it without question, but the pendulum has swung so far in the other direction that some parents are reluctant to say no at all. As usual, the sensible route is somewhere in middle.

Ruth Ancer, a Johannesburg-based clinical psychologist, says if you don’t allow children to challenge you, you take away their assertiveness, which is their protection against abuse and exploitation. “But parents are allowed to make the final decisions for children, and then, in appropriate circumstances, we can talk about why; it doesn’t have to be done on the spot. Parents don’t have to go on trial for their reasons, or prove their case. You need to have a relationship with your children where they can ask you and challenge you, but as part of a discussion, not in a demanding, entitled way.

“I think our problem is that we have become an entitled society. And we should be careful – we don’t want our children to think they are owed things just because they want them,” she says.

Very young children (and even some older ones) don’t understand the difference between needs and wants and haven’t a clue why their shopping demands are not satisfied in the way yours seem to be, as you drop things into the trolley with apparent abandon. They may not accept the reasons immediately, but time and repetition are important to the learning process.

Financial planner Debbie Netto, the founding director of Netto Invest, agrees that wants should not just be ignored. “In fact, they give you a good opportunity to introduce children to the concept of the family budget. Teach them that, while there are many items in the store they might want, they don’t need them. Instead of saying ‘we can’t afford it’, which is a difficult concept for a small child, tell him or her that it is not in the budget – or on the shopping list. Even if a child does not yet understand numbers, you can talk about how much money you have to spend and make it clear that you are choosing items that don’t cost too much.”

These are the kinds of conversations you can have as a matter of course:

* Encourage children to participate in drawing up the shopping list: “We need to buy a gift for granny – what would she like? We must get a new lunch-box for your sister; let’s find one that doesn’t cost too much. We all want fruit – would you like to choose?” That way you demonstrate not only that things are not bought on a whim (or on demand), but also that spending decisions are carefully considered and take into account the needs of others.

* Use shopping trips as an opportunity to talk about the family budget and to make it clear that it is limited and must be made to last. Pose questions like: “Do we really need this?” or “Shall we leave this till next time? We have enough at the moment.”

* If you build in choices, children learn to prioritise and postpone gratification – two of the fundamentals of money management. For example: “If you buy that, we’ll have to leave out this …”, “If you have that now, we won’t be able to get that other treat later”, or “If you don’t buy one now, you’ll be able to buy a bigger, better one next time.”

 

First things first

As they get older, differentiating between wants and needs gets trickier. Sue and Craig Torr are co-directors of financial services company Crue Consulting in Cape Town and have three teenage sons. Sue says she is aware that perceptions of wants and needs are all too subjective. For example, does a want become a need if all the other children have got a cellphone or an iPod?

“We like to talk about what they want now versus what they want most,” Sue says. “Children need to understand that every single purchasing decision impacts on their ability to purchase something else in future. For example, a child nags his mother for a new computer game. Her immediate response is ‘you don’t need it’, and she’s absolutely correct. The problem is that that answer doesn’t satisfy the child’s desire for a new computer game, and the result is endless nagging and eventual capitulation on the part of the mother.

“On the other hand, she could say: ‘If we buy you the computer game now, you won’t be able to get the new life jacket you need. We need to spend on the things that are important to us first, rather than on what inspires us. As with everything else in life, I believe children need to be taught that every action has a consequence.”

 

Making money is hard work

Children need to know that money is the product of work, although parents don’t show the physical signs of hard labour, or bring home a big bag of coins at the end of the week, as they would have done in another era. Earnings are largely intangible and payments happen invisibly, so children have to be encouraged to participate in the earning-and-spending cycle so that they grasp the reality of “money in, money out”.

Rick Briers-Danks has the Certified Financial Planner (CFP) accreditation and works at Veritas Wealth in Cape Town, but even he describes introducing these concepts to his two young children, aged eight and four, as a “learning curve”.

He says children don’t need to know what you earn “to the last cent, but I do think they should be able to get a sense that money does not grow on trees … you don’t just swipe a card and there it is. And that comes from talking to them: ‘you know the money has to be in dad’s account?’

“Our kids do get that you work, you get a salary; you both work because there are school fees to pay; we have to save for holidays … and holidays don’t have to be expensive, they can be camping.”

Awareness of the hidden costs of living – for example, spending on utilities, insurance, rates and security – is an important part of understanding that there are multiple calls on earnings, and children are often genuinely surprised, Patel says. Children in primary school may be given the task of finding out what their families’ electricity and water bills were for a particular month, so that they can then have a class discussion about how the cost of living varies from family to family, she says.

Parents can encourage awareness of the cost of living by:

* Involving children in their efforts to reduce electricity and water consumption and offering a reward for reductions in bills, such as a special dessert or an outing, or extra pocket money.

* Reinforcing the association between money and work by putting a price on certain tasks they wouldn’t usually do, such as watering the garden with the hose, or vacuuming the car. Instead of the car being cleaned by the local cleaning service, give them the chance to do it themselves – and explain why it costs the family less to do things themselves than outsource tasks to entrepreneurs who need to make a profit.

* When the opportunity arises, remembering to let them know about the unglamorous costs of the things they prize – for example, the DStv subscription, wi-fi, or the stolen bike they were able to replace through insurance.

 

Avoiding the credit trap

In high school, when children’s belief that money is finite and hard-earned threatens to be toppled by a growing awareness of borrowing and the credit card, it is time to teach them that credit is expensive, Van Deventer says. Do the sums and ask them if they want the object so badly that they are willing to pay 50 percent or 100 percent more for it? Will it last as long as the debt will? What could they buy with extra money they’d be giving up? Then let children think about it, and they are likely to find their desire waning rapidly.

It is also a good idea to allow children to borrow money from you, if they want to, as long as you adhere to the repayment agreement and don’t weaken. The unrewarding process of paying back, particularly if the novelty of possession wears off rapidly, is a valuable lesson in the desirability of postponing gratification and living within your means.

 

Instil the habit of saving

Saving is the most crucial lesson of all; if children can learn to postpone gratification for the sake of short- and long-term goals – and even see saving as just as important and exciting as spending, because of the options it will give them (a car, travel or a gap year), they will have money under their control for life. And if they treat saving as an essential expense, alongside money for cellphones and entertainment, they will grow up spending what they have left over of their income, instead of saving what they have left over.

At any age, saving is so much more enticing when the rewards are obvious, so keep savings very visible when children are young, Briers-Danks suggests.

“You can use one or more clear jam jars to differentiate different kinds of savings and make a savings goal chart, with squares for each week required to save up for a specific goal. Use stickers or stars to show progress,” he says.

* Money for the savings jar should be in small-denomination notes and coins so they pile up rapidly. Remind relatives and friends to give gifts of money the same way.

* Take into account the limited attention span of small children by keeping saving goals short term, so they don’t lose interest.

* Let them choose their own goals, advises Gerald Mwandiambira, a CFP professional, the former acting chief executive officer of the South African Savings Institute and an author and radio personality. “It might sound like a good idea to have all your child’s savings go towards education, but little children can learn a lot from setting short-term goals that are fun and meaningful to them. The pay-off should not be too far in the future and unattainable. When they are able to set goals, they grow up being able to save longer and better,” he says.

Children should also be allowed to make mistakes with their savings, Netto-Jonker says. “Provided they have saved enough for a specific ‘want’, it is important that they are allowed to go ahead and buy it, no matter how convinced you are that it is a waste of money,” she says. “Finding out that it was not worth the money spent on it will start to teach them the value of money. This valuable lesson helps to instill smart spending habits.”

You can suggest a division of goals into short and long term when they get older and have accumulated some savings. Then, Mwandiambira says, take them into a bank to open an account. “Yes, an actual bricks -and-mortar bank branch. This helps youngsters to understand where their money is going and introduces them to the concept of financial institutions.”

That is the time to introduce them to the ally they have in compound interest. Do the sums with them and show how interest-upon-interest works miracles with long-term savings. Dempsey suggests this example: an 18-year-old starts saving R500 a month and keeps it up to age 55, earning an annual interest rate of nine percent. The total contribution would be R220 000, but, as a result of the compounding effect, the nest egg would grow to R1 689 000 by 55.

If the same person started saving three times as much, but only at the age of 30, also earning interest of nine percent, the contribution would be R450 000 by 55, but the total value would be only R1 662 000.

The Torrs give their teenagers pocket money on condition that 10 percent goes to charity and 50 percent of the balance is saved or invested. “After that,” Sue says, “they need to understand the options they have with the remaining money. They don’t have to spend it. They can choose to save or invest the full 90 percent, and it’s perfectly alright if they don’t know what they are saving or investing for.

“We need to stop children from believing that all saved or invested money should be earmarked for a future material purchase. We need them to understand that money has greater power than merely the power to purchase things. Saved money has the power to buy freedom with your time.”

 

Should children be investing?

Short-term goals (over less than five years) can be catered for by a savings account, such as a fixed-deposit or money market account, Dempsey says. “The risks are low, but so are the returns. This would suit a teenager saving for an electronic device or a big holiday after the matric exams.

“To achieve long-term goals, children should invest for inflation-beating growth. Suitable products include unit trust portfolios, exchange traded funds (ETFs) and endowment policies. Tax-free investment products are also good options to consider.”

Christelle Louw, advisory partner at financial services company Citadel, introduced her two children to investing at an early age through a monthly investment in the Satrix 40 ETF. She agrees that tax-free investment funds provide a great platform for children to “experience the pride of being a shareholder”.

“We have made a point of discussing the financial markets with our children, to stimulate their interest. It is critical that money works for you; it’s no good just leaving it in cash, because it is losing through inflation. It is also important to experience the movements in the markets and to know that you should be prepared to stomach losses from time to time.

“Interestingly, our children’s responses have been different,” she says. “Both are delighted with their investments, but our 15-year-old son has shown a desire to get involved with the investing himself. So much so that we switched his investment in the Satrix 40 into a share portfolio. He thoroughly enjoys making investment decisions and is fully involved with his portfolio. By contrast, our daughter has been very happy remaining in the Satrix 40, and this has been a great choice for her.”

 

Have a pocket money system

Pocket money is the most obvious and popular way of introducing children to money management, but it is not an easy thing, as many a floundering parent will testify.

Bronwen Reynolds (see “Navigating the pitfalls of pocket money”, below) failed with her first attempt and Briers-Danks, her boss, confesses to having “dabbled” with pocket money for his eight-year-old daughter and been unable to make it stick. “I have enough problems with what the tooth fairy brings at the moment,” he laughs. He plans to revisit pocket money when she is a little older.

Sometimes it’s just parental confidence that is lacking. When pocket money works, it tends to be because parents plan carefully, work out exactly what they want to achieve and implement the system consistently, without being rigid. They communicate the plan to their children and practice what they preach. As Louw puts it, there is no substitute for parental example. “If you want your children to budget, save, give and invest, then you need to be doing the same.

“I believe that parents need to strike a balance with pocket money,” she says. “They should not be too controlling or prescriptive about how children spend the money, or the key lessons of budgeting and saving will not be learnt. However, it is important to agree on what the pocket money is for – perhaps entertainment and gifts for friends, saving for specific items and maintaining an emergency account. Just as adults need to have a kitty for emergencies, children should, too. We urge our children to save up three months’ worth of expenses.

“Empowering teenagers with a bank account enables them to plan, draw cash and pay for things themselves. But – and this is important – parents should expect something in return for the pocket money they give children. It’s not just a handout. Have an agreement that they will contribute to the household by doing chores, so the message is clear: money is earned.”

 

How much?

Deciding how much pocket money to give is the first stumbling block for many parents, but the experienced Torrs believe that the amount you give is less important than the principles that underlie the policy. They have been giving pocket money to their sons monthly from the age of five.

“At first, we started on the basis of age: so, if they were five years old, they got R5 a week, and this increased as they got older,” Sue says. “In return for their pocket money, the children were expected to help around the house, feed the dogs, help in the garden and do general chores. However, from the beginning, we explained that the general principles behind giving pocket money were:

* To learn to handle hard money and know that “cash is king”.

* To learn that income is finite.

* To give 10 percent of pocket money to a charity of their choice.

* To save 50 percent of what remains for later use. The balance is available to spend on treats and toys if so desired.

* To learn the importance of being custodians of money – in other words, what you have been given is a blessing and you are completely accountable for what you use your money for.

“As our children got older, we started paying their pocket money directly into their bank accounts. They also have their own bank cards and are able to access their own money,” she says.

 

What should pocket money pay for?

Teenagers’ lives have changed dramatically in a generation: they are less sheltered, busier and more socially connected, so parents have a far more challenging job of assessing pocket money needs. The Torrs should know, with sons aged 18, 15 and 13, all with hectic sport, academic and social schedules.

“Teenagers have a lot more intangible expenses than we had,” Sue says. “From about grade six onwards, airtime and data become an essential part of life. Instead of fighting this trend, we have decided to embrace it: in a large family like ours, smartphones are an essential part of organising everyone’s day through WhatsApp and online school calendars.

“In addition, children need constant internet access to meet their academic commitments. Naturally, a certain amount of data/airtime will be used on social networking with friends, and this needs to be considered a normal part of life. So each of our children has a modest smartphone on an entry-level contract that provides them with sufficient data and airtime to cover their monthly needs in terms of their academics and managing their after-school schedules. They have wi-fi access at home, which helps to curtail expenditure.”

 

Reckless spending

Despite parents’ best efforts, some children can’t resist blowing pocket money immediately on sweets and toys, and Briers-Danks believes that that is the signal to put pocket money on hold for a while.

“Children are not ready for it until they are able to get the bigger picture – that you’re not giving them money just to spend it. That’s not the purpose of pocket money.”

 

Make sharing part of the package

Everyone wants their children to be generous, and given the extremes of poverty and affluence in South Africa, few would dispute the importance of taking generosity beyond family and friends and into the community. But how to instill the habit of sharing and giving in your children?

A recent study by academics at Indiana University in the United States, in partnership with the United Nations Foundation, found that the children who were most charitably inclined had good role models in their parents (no surprise there), but – even more importantly – also had plenty of open discussion at home about giving, with the emphasis on the impact of giving, rather than the moral arguments.

The study found that children were equally receptive to giving, regardless of gender, race, age group or income, prompting the researchers to conclude that “all children can learn to be philanthropic”.

Children can develop the habit of thinking of other people by putting a small percentage of any money they receive into a fund that covers gifts for friends and relatives and one donation to a favourite charity at the end of each year. The donation portion can also be used to contribute to emergency relief efforts that capture the imagination of the nation or the world, so that children feel involved in events that everyone is talking about.

Another idea is to suggest children dedicate their birthday parties to a charity and ask their friends to bring small donations instead of gifts. They might be a bit ambivalent about the notion at first, but they’ll love totting up the amount collected at the end of the party, delivering it to the charity and giving their friends feedback.

The Torrs believe in tithing, or giving 10 percent of income to a charitable cause, so it was natural to incorporate that principle into the pocket money regime from the start. But they also made a point of translating the money into useful goods.

“We used to take them to Pick n Pay with their 10-percent tithe to buy nappies and milk formula, which they would then take to the local children’s safe house. Those experiences influenced them enormously and they have never questioned the need to ‘give back’,” Sue says.

Patel says children tend to think they can’t make a difference at their age, and she sees their excitement when they discover that “every bit does help”. She agrees that giving needs to be combined with going into the community and seeing the effect. “So often now, the community is an invisible concept; everyone just looks after themselves,” she says.

 

Be open about family finances

Some parents worry that they will be diminished in their children’s eyes if they reveal the nuts and bolts of what holds the family’s finances together: how hard they have to work, what difficult spending decisions they have to make, what juggling they have to do to balance the budget.

Then again there is the natural desire to shield children from reality. But our children are more perceptive and resilient than we sometimes give them credit for, so they may be happier being taken into your confidence than trying to guess what “we can’t afford it” really means. They may also be much more inclined to prioritise their wants and needs and postpone gratification if they know you have to do it too.

“Parents don’t talk to their children honestly enough – they often talk behind doors,” Patel says. “You don’t have to tell them everything, but explain enough to make them feel included and understood. And get them involved. If you need to save more, or plan an inexpensive holiday, sit down with them and let them have a say in how it will be done.

“If there are financial difficulties, children are quick to pick up on unhappiness and tension in the family,” she says. “You don’t have to tell them there are problems, but you can talk about changing circumstances and what you can do as a family to make things better.”

“I think it depends on the child’s age and maturity,” Ancer says. “There needs to be more discussion than there was in the past, but not about financial concerns, which children are powerless to do anything about. You can say ‘prices have gone up, so we have to be more careful’, but handle your anxieties away from children. For example, tell them you’re cutting down on the tuckshop, or ‘we can’t afford three extramurals this term, so you must choose which one you’re prepared to give up’. That teaches them about compromising and prioritising.”

The Torrs operate on the principle that all discussions about money are positive: “In general, children must never be left worrying about the family’s finances, how the bond is going to be paid or how the school fees will be paid,” Sue says.

“Instead of just saying ‘we can’t afford it’, we’ll say something like: ‘We have a number of things that we need to spend money on this month. Dad’s car needs a service and John is going on a hockey tour to Joburg, so it’s going to be quite an expensive month. We’ll manage, but it may mean not going out this weekend, or waiting until next month to replace your rucksack.”

Louw says: “Of course, we don’t share everything with our children, but we do sit as a family and explain where the money comes from and where it goes. For example, we decide on financial priorities for the year and how we will achieve them. We recently bought a new house and we explained how we would cover the cost of buying it. It is important for them to develop an understanding of this type of transaction.

“We have also discussed with them what they should do and who they should contact in the event that we pass away,” she says. “They know where to find our wills and have the comfort of knowing we have looked after their well-being in that scenario.”

Privacy is an issue many parents worry about: will children talk about the financial compromises parents have had to make, or perhaps even brag about a windfall the family might have had?

“They don’t have to know details,” Ancer says. “In South Africa, people are private about money. I don’t think anyone should tell a child what they earn and then say ‘don’t tell anyone’. They don’t need to know private details, and they don’t need the responsibility of confidential information.

“My main approach to children is that you have to be honest, but you have to take into account what they can cope with and what is appropriate. When they ask about money, look at what’s behind the questions. Try to answer in a way that is digestible. If you lie to children, they just discover afterwards that you lied to them. If you overprotect older children, you set them up to be confronted with things they’re not prepared for. If you make money a taboo topic they never learn not to be afraid of it.”

 

Help them cope with materialism

In a material world, with temptation beamed right into children’s bedrooms via their smartphones and laptops, it is an enormous challenge to keep their feet on the ground. Not only do children have to manage their own needs and wants, but they also have to learn to accept that others’ perceptions of needs and wants and are different.

“If you raise your children not to judge people by the cars they drive, the houses they live in or the brands they wear, the chances are your children will not be impressed or inspired by these things,” Sue says. “From the outset, we need to teach our children to be impressed by things of real value: work ethic, qualifications, entrepreneurship, for example.”

Research has shown the futility of accumulating material things because of a phenomenon known as the “hedonic treadmill”: the more we have, the more we want and expect. Briers-Danks is a great believer in the value of experiences over things. “For my family, holidays are the most important things in our lives; the pleasure of those experiences lasts much longer than the pleasure of things,” he says.

“Give children experiences that immerse them in the great outdoors, unknown places and cultures. If you are giving them material things, try to make them experiential as well – for example, a bicycle, a musical instrument or a camera.”

When children clamour for things, Ancer says, “the danger is not in denying the child too much; more often it’s about parents giving in because they don’t want their child to be embarrassed. They are uncomfortable with their child’s distress. The important thing is to have discussions: asked why their friends can have something and they can’t, you explain that other families have different priorities – and maybe they have more money and better-paying jobs. And when they say ‘why can’t you just get a better job?’, you explain that jobs aren’t just about the money.

“If you are parenting with somebody else, it’s important to try to ensure you have the same approach,” she says. “Otherwise the children will manipulate. It’s about being flexible, but also having the courage to do what you want to do, guided by your own values and principles.

“If your children have self-esteem, they will be able to withstand the disappointment of not having everything their friends have. And if they have no self-esteem, having everything their friends have will never be enough,” she says.

 

NAVIGATING THE PITFALLS OF POCKET MONEY

Ask Bronwen Reynolds which expenses threaten to derail her careful pocket money strategy and she will tell you birthday presents for her daughters’ friends and the cost of Uber taxis. She and her husband, Graham, implement a carefully researched pocket money policy to handle the expenses of their three daughters: Melissa, 19, at university and living in res (the Uber user); Donna, 17, in matric this year; and Josie, aged 13 and in grade eight.

Bronwen works as the personal assistant to financial planner Rick Briers-Danks at Veritas Wealth (see main story), and Graham is the financial director of an advertising agency.

When the older girls were in junior school, they were introduced to pocket money via a popular system based on age: R10 a week at age 10, R11 at age 11, and so on. “Then you teach them to keep R2 for collection at school assembly, to save a bit, and so on,” Bronwen says. “A lot of people start like that, but it didn’t work for us. I think our mistake was writing pocket money in a notebook, instead of putting it in a bank account. We’d forget to write it down, and it just didn’t seem to mean anything.”

So they abandoned pocket money at that level and started again in earnest in high school – with bank accounts and debit cards. Josie, in her first year of high school, has just started on R150 a month; Donna gets R300 a month. Melissa, with her university accommodation, food and books paid for, gets R330 a week, paid by the month. The amount of pocket money is based on the family budget, which “wants” the girls should have within their discretion, and the advice of family and friends with experience of pocket money.

On these sums of money the girls are expected to pay for entertainment, including big-ticket items, such as concert tickets, non-essential clothes … and, in theory, birthday presents for their friends.

“Presents for children are my biggest struggle,” Bronwen says. “By the time they’ve bought 20 presents for their friends in a year, there’s no pocket money left. In the last term of grade seven, Josie had one or two birthday parties every weekend for six weeks. That is a bigger issue for me than pocket money: how much do you give a child aged 13 to cover presents?”

And the problem is not solved at university, she says. “Melissa and her friends give each other small things for most birthdays, but when there is a bigger present for a special friend, she wouldn’t manage and we help out.”

Since Melissa doesn’t have a car at university, she is the one with the Uber habit. “Is it up to us to pay for it, because she doesn’t have a car? My husband says he will pay if she’s going to hockey practice, but not if she’s socialising. So sometimes she can’t afford to go out with her friends, because she can’t afford the Uber. But, as he says, the objective of pocket money is to learn the value of money and how to budget. Not being able to afford something is a good life lesson.

“Yes, she does complain, but she lives with it and sometimes she just smiles sweetly at her father! In fact, she told me she is actually managing to save. I was quite impressed. She wants to go overseas, so she has an incentive to save.”

About the often fraught issue of clothes for teenage girls, Bronwen says that – theoretically at least – she gets them just the basics they need for the season. “So if they need new shorts, sandals and a bikini for summer, I’ll get them. They must get other things they feel they have to have out of their pocket money. It doesn’t always work like that, though. It’s just my weakness: I think ‘that’s such a pretty dress’ and I buy it for them. But they also shop quite cleverly; I think that’s one thing you can say for children who are given a budget and have to manage.”

Pocket money had to be, she says, “because otherwise the requests are endless. It is a bottomless pit. I have never been very good at managing my money, so I think if I could give my girls just one thing, it would be to be a bit better than I was. I think it’s quite an empowering thing to be in charge of your money.”