It’s back to school for millions of South African learners. But one of the biggest lessons they need to succeed in life – how to be smart with money – is taught at home, and the best time to start teaching kids good money habits is right now.
In fact, the earlier you start talking to your children about money, the more likely they are to develop good money habits that will stand them in good stead for the rest of their lives, says Stian de Witt, who is the executive head of financial planning at NMG Benefits.
Research shows that the sooner children start learning to manage money, the better off they are as adults. A Cambridge University study suggests that by the age of 7, children can develop many of the basic financial behaviours they need in adult life.
“Building a strong financial foundation from a young age is critical. Even legendary investor Warren Buffett credits the early money lessons his parents taught him with setting him up for success. That’s why it’s so important that we help our kids build a healthy relationship with money from an early age,” said De Witt.
It’s Never Too Early To Start
Talking openly about money matters with your children will build their financial awareness. Include your children in conversations about your monthly budget, income and expenses from a young age. Show them how to prepare a budget. Get them to calculate the tip on a restaurant bill. Get them involved in choosing the best grocery items based on cost and quality. “These may seem like trivial tasks, but they all help make a child financially savvy from an early age,” said De Witt.
Teach Your Children To Budget
Help your children set up a simple age-appropriate budget – maybe one third for spending, one third for saving and one third for giving, for example. Or open a savings account for them and deposit a portion of their pocket money into it every month. “When they start to see their money grow, they will start understanding the value of saving, compound interest and budgeting,” says De Witt.
Set A Good Example
It’s not enough to simply teach your children about money: their biggest influence is the way you discuss and handle money around them. “Children learn by watching you. It’s no use teaching them to budget the one day and then going on a shopping spree the next. You’ve got to show them what good financial habits look like,” says De Witt.
Help Your Children Earn Money
Don’t just give your kids pocket money without requiring them to do something for it. The sooner they learn how hard it is to earn money, the sooner they will learn to be financially independent. Get them to wash the car or mow the lawn. And if they only complete two out of three chores, only pay them two-thirds of their pocket money – and explain why you’re cutting their pocket money.
For older children, packing grocery bags or working as a teller or a waiter doesn’t just teach money lessons. It teaches how to take instructions, work with others and handle workplace stress.
“Educating your children about money takes time – but it will instil good habits that will serve them well for the rest of their lives,” said De Witt.