Important financial lessons to share with your children

2017-03-14 06:04

FROM a much earlier age than most parents think possible, children have the capacity to soak up financial lessons such as understanding the value of things, saving towards something, and that money must be earned.

Games such as playing shop or even old-fashioned marbles, where the coloured glass balls are the currency, can teach children important financial lessons.

Other than the informal market of the playground where marbles or Stikeez substitute for money, most schools don’t formally teach young children “money” or financial principles – it’s largely up to parents.

What are the lessons you should teach your children?

Marlies Kappers, head of marketing at financial services provider, DirectAxis said most of the literature touches on seven broad principles.

Do you need it?

Something you can do early on is to help children differentiate between wants and needs.

We’ve all seen children in the supermarket, or worse, experienced our own children whining because parents won’t give in to demands for sweets.

Rather than telling children you’re not buying them something “because we can’t afford it”, explain that you’re choosing not to spend your hard-earned money in that way.

It’s even better if you can say why: “I’m saving some money so we can go to the movies together in the school holidays.”

Understand the value of money

Games such as shop-shop, in which children “buy” differently priced items with loose change or even marbles, are a good way of starting to teach young children the value of money.

As they get older you can take the lessons to the real world and ask them to help you do price comparisons between items in the supermarket. Explain why you make the choices you do. For example, it may seem more expensive to buy a larger bag of rice or potatoes, but it’s cheaper than buying two smaller bags.

Using price-comparison apps such as pricecheck, or by visiting https://www. pricecheck.co.za, you can get older children involved in checking where you can get an item at the best price.

There’s no hard-and-fast rule about when to start paying pocket money, but there seems to be a general consensus that about age six is a good time.

Pocket money is an important step in teaching children financial responsibility.

If you give them some money every time they want something, they may struggle to grasp the value of money and the basics of budgeting later in life. Pay children pocket money once a week. As they get older, make this once a fortnight and later once a month. This teaches them to make it last.

Building on the lesson about understanding the value of money, children must be taught that pocket money is earned, not given.

They can earn it for doing household chores such as making their bed or tidying their room. As they get older and receive more pocket money, so their responsibilities should increase.

The accepted rule of thumb is you should save 10% of what you earn.

You can encourage younger children to put away some of their pocket money in a piggy bank each week. As they get older, open a bank account and suggest they try save some pocket money and also any additional income they may get.

Teach them money management

Teach children to manage their money from the outset. If they want a toy, gadget or fashion accessory explain how they will need to save for it, possibly sacrificing other treats.

Help them keep a record of earnings and expenditure in a book or on a spreadsheet.

When you pay pocket money look at the previous month and explain what they did well or how they might better have spent or saved their money. If they do want to buy a big-ticket item such as a bicycle and you lend them the money, getting them to pay it back in instalments over a given period will teach them how to manage debt.

Only suggest or advise. You shouldn’t dictate how children should spend their money.

The biggest lesson they’ll learn is when they splurge on something and later realise it was a waste of money. When they do, don’t bail them out.

Let them make their own plan to supplement their income by doing more chores or part-time work.

— Business Editor.

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