Teaching your children to be smart with money is a vital skill to impart on them. Being able to handle one’s money efficiently and effectively can help set you up for a lifetime of financial freedom. Starting your children’s financial education is then best started as soon as your children can count. The earlier you start, the more interested and confident they will be in managing their money correctly. Money management should eventually become a habit that your children have a positive attitude towards, rather than a grudge action. With that in mind, here are some helpful tips to teach your children the value of money and the importance of saving.
Start with yourself
Children pick up a number of habits and behaviours from their parents, usually without even knowing it. According to René Roux, Head Distribution Marketing for Sanlam Personal Finance, “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.” By demonstrating a positive and healthy relationship with money, your children are more likely to follow the same path.
Whether it’s setting up a long-term savings goal to take your family on a nice holiday, or creating an investment account for your children’s educational needs, your children will see these actions as a commonplace occurrence, normal day-to-day life.
Get a piggy bank
Seeing parents manage their money alone isn’t enough to instil a lifetime commitment to sound financial management. Children need to deal with physical cash themselves to begin to understand the concept of currency and how it can be used. While you might think the age of the piggy bank has passed, a visual representation of collecting money is a sound way to instil a savings culture. If a child can physically see their savings grow, they will be encouraged to keep going in order to save enough for an item they’d like to buy or to put into a bank account.
Whether it’s an actual piggy bank, or a reused jar from the cupboard, having a savings pot in front of your children will help them come to terms with the idea of saving. Make it a fun activity and get your children to decorate their jar, or let them pick out one they like from a shop. The more personalized the piggy bank is, the more ownership they will have over their savings.
Put a pocket money system in place
When your children get to an age where they understand the concept of currency, a pocket money system is the perfect way to help them understand the value of money, and that it is earned, not given. Pocket money is also an introduction to budgeting, and will allow your children to learn to manage the amount given to them within a given time frame. It is important to let them make mistakes. If they spend their pocket money within a week of receiving it, and have another three weeks to go until they receive more, they’ll learn to manage it better the next time around.
Set a maximum amount that you can afford to give your children on a weekly or monthly basis, and based on the number of household chores and/or charitable activities they complete within this time, this amount will be given to them. You can even put up a chore/activity sheet that tracks the system and incentivises them to get their jobs done.
Open up their first bank account
Opening up a bank account for your children is their entrance into the world of financial institutions. Apart from allowing them future access to a number of financial products, such as credit, a bond or a Personal Loan, a bank account will introduce them to a formal savings accountwhere they can see their money grow, and learn the basics of depositing and withdrawing cash.
Different banks offer different products for children, and while it may be tempting to open an account with the same bank you’re with, it is recommended you do your research to find out which institutions offer the best deal first. Some banks offer a junior account for anyone 18 years and younger, some 19 years and younger and some up to 25 years of age. Fees are often not imposed on these accounts, and parents are required to present their ID document, their child’s birth certificate and a proof of address upon opening the account.
Let them set goals
While long-term saving is a vital skill for children to learn, it’s also important to show them that they can spend a portion of their savings on a short-term goal. Experiencing the purchase of an item they have saved for will give meaning to the savings process, and help them understand the satisfaction of buying something with their own money.
Let them write down a few things they want, and stick them up for them to see in their bedrooms. They’ll have goals to focus on and save towards, and help them not to spend their money impulsively. Teaching your children the experience of paying for something with money they have, rather than paying for something using credit, goes a long way to teaching them not to use money they don’t have to satisfy moments of instant gratification.
Children learn from experience, and the only way they’ll become money-wise is if you offer them money-related experiences, like the ones above, to help them come to grips with financial management. From a savings jar, all the way to a formal savings account, there are a number of ways you can teach your children how to be financially savvy from a young age. It is important to remember that these tips are flexible, and can be adapted to suit the age and personalities of your children in order to make them work.
Disclaimer: This article is provided for informational purposes only and should not be construed as financial or legal advice. Hippo.co.za and its affiliates cannot be held responsible for any damages or losses that may occur as a result of this article.