How do we get our kids to manage money better than we do?
Teaching children about finances is not just about saving pocket money; it’s also about giving them the skills to manage their money. The best gift you can give your children is to teach them to plan around their money – in other words to budget.
Children learn best from example. You can’t teach your children to budget if you are not doing your own household budget so it really starts with you as the parent.
Pocket money
Pocket money is an excellent way to help children not only learn the value of money but also how to manage it. You can start with pocket money as soon as your child has learnt to count.
For younger children having enough money to go to the shop and buy a treat will give them a sense of independence and encourages maths skills as they learn to calculate and count change.
An older child can start setting goals and pocket money can be used to teach saving – for example they can save towards a special toy or item of clothing.
Once they become teenagers, pocket money can turn into an allowance where the teenager becomes responsible for buying their own toiletries, clothes and entertainment.
Budgeting
Discuss the household budget with your children and if appropriate, allow them to give ideas towards how to allocate that budget.
Holidays are a great opportunity to involve children in budgeting by providing a set amount that the family can spend over the holiday and then researching activities or ways they would like to spend it.
The teenage years are a great time to teach a child how to live on a budget. Help your teenager calculate how much they need each month for their toiletries, clothing, airtime and entertainment and give them a monthly stipend which they must use for their day-to-day spending. In the first month they may blow it all on airtime but within a few months they will have learnt to make the money last – as long as you stand your ground and don’t give them extra cash!
Open an account
A bank account helps to teach a child about saving and about banking. You can even turn it into a family project – help your child to research the various bank accounts and to understand the most cost-efficient way to bank.
For older children with longer-term goals, opening an investment account that is linked to the stock market can be an excellent way to teach them about long-term investing. If for example your teenager has a holiday job or a weekly part-time job, encourage them to put R200-R300 away each month into a unit trust. Even if your 16-year-old saves just R200 a month into a unit trust and it grows at 12% a year, it could be worth as much at R17 000 by the time they turn 21.
Remember tax-free savings accounts can be opened in your child’s name and they can contribute up to R30 000 a year. As no tax is payable on the growth this can be a significant benefit for longer-term savings. |
