As parents, we tend to be quick to build our children’s social, academic and extra-curricular skills, but at best we see money management skills as a lesson to be saved for a later day or at worst hope it will be picked up at the “University of Life”.
The reality, however, is that children are far more capable than we, as parents, often give them credit for, and by delaying the introduction of money management, we are delaying their sense of financial savvy.
From as early as a child’s toddler years, parents can begin introducing the concept of exchanging money for goods or services. Use play scenarios to get the messages across, and look out for educational shows online.
Children as young as 4 or 5 years should begin receiving an allowance, which they can use to save up for a toy or treat, to encourage an understanding of the cost of immediate and future gratification. To teach them the value of work and accountability, you can link this allowance to accountability for household tasks or activities.
From about 8 years, you can introduce children to the basics of household budgeting. Give them a piggy bank (physical or virtual) so they can deposit part of their pocket money, and watch it grow.
Later, as teenagers, you can introduce additional financial responsibilities, such as paying for their clothing and entertainment. This should help them to differentiate between their “wants” and “needs”.
Priya Naicker is the head of strategic retail marketing at Old Mutual Personal Finance.