How to raise financial superheroes
As parents, we teach our children to tie their shoelaces, count to ten (and beyond) and share with their friends, among thousands of other lessons. But, one thing we don’t always do (or get right) is teach them about the value of money and how to manage it well. Here are three financial principles worth instilling in your children, and how to go about it.
1. Start by saving
Teaching your kids to save is one of the most important ways to set them up for financial success. And it doesn’t need to be a chore – in fact, the more fun the experience, the more likely it is to become a habit.
How to do it: Start by putting an allowance in place. How much you give them is entirely up to you and is likely to depend on your financial situation, how many chores you give them and what you expect them to do with their pocket money. One popular approach is to pay your child R10 per year of their age. So, if they are six (probably a good time to start with an allowance), they would receive R60 a month. As they grow older, you may want to consider boosting their earning potential by allowing them to do jobs over and above their chores. With an ‘income’ in place, you can then decide as a family how much should be committed to monthly savings, and how much can be spent. Financial expert and author, Dave Ramsey, recommends using a clear jar rather than a piggy bank for savings as it allows kids to see their money growing from month to month.
2. Spend wisely
When it comes to spending, it’s important that you lead by example. And here’s why: “South Africans aren’t saving enough and are buckling under the weight of consumer debt of nearly R1.7 trillion.” (Moneyweb.co.za)
How to do it: Be open with your kids about money and take every opportunity to caution them against reckless or impulsive spending. One way to do this is to put a 24-hour rule in place for items over a certain price threshold. So, if your child spots an item they’re convinced they can’t live without, but probably don’t need, encourage them to think about it for a day and if they still feel they can’t live without it, allow them to spend their money. This way, they’re learning to exercise restraint and even if it’s still not the wisest decision, we all make mistakes, which hopefully becomes an opportunity to learn. Or as actor, Steve Martin, puts it, “I bought some pretty good stuff. Got me a $300 pair of socks. Got a fur sink. An electric dog polisher. A gasoline powered turtleneck sweater. And, of course, I bought some dumb stuff, too.”
3. Make a budget
Dave Ramsey explains this crucial financial tool as “telling your money where to go instead of wondering where it went.” And while the teenage years, when your children start to develop a social life, is an excellent time to teach them about budgeting for things like movie tickets, clothing and toiletries, you can start educating them about the value of money and buying power from the early years.
How to do it: When you’re shopping for groceries, highlight the cost of everyday items like bread and milk and get them to start comparing prices – ask them to select the cheapest bag of sugar on the shelf or to tell you which box of eggs costs the most. Ask them to weigh your fruit and veggies and ask them to work out the cost of one banana or potato – this will do wonders for their mental maths capabilities, too! Once they’re ready to start budgeting, speak to them in a language they understand – find an app that can help them manage their money.
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Frank Financial Services is a juristic representative of the Standard Bank of South Africa an authorised financial services provider (FSP11287). Products are underwritten by Liberty Group Limited.
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