The pocket money app, RoosterMoney says its statistics show that on average the pocket money rate for children in the UK stands at R100 a week, amounting to R5 000 a year and children are saving, on average, R2 000 annually for a rainy day.
While there are no pocket money statistics available in South Africa, research has shown however that in terms of saving, South Africa has one of the lowest savings rates in the world.
Susan Steward of Budget Insurance believes the best strategy to change this trend is to foster a money-savvy culture for our children while they are young.
"While we can improve our money habits, the best thing we can do for our children, the next generation, is to start teaching them money management skills from a young age," Steward says.
But this might prove challenging given that children today are targeted with sophisticated marketing campaigns, so says Vince Shorb, chief executive of the National Financial Educators' Council.
Shorb warns that via these marketing campaigns children are constantly encouraged to spend money.
"This early breeding of consumerism behaviour can spell disaster to their finances as they mature," he says.
How to teach your children good money habits
"Instilling great money management behaviour in your children does not have to be an arduous exercise. You can help them learn by implementing a few key changes in and around your home," Steward says.
According to Steward, here are a few practical tips on how to raise money-savvy kids.
Teach them budgeting by example
Include your children in family budget discussions from an early age. In older generations, money was often a taboo topic and not considered suitable for polite conversation. Break the cycle by talking to your children about money choices.
For example, you could discuss how much money you saved over the lockdown period by eating at home, rather than eating out. Or talk to them about the monthly electricity bill and the cost of using your tumble-dryer in winter months.
Pay them in cash
You may give your child an allowance or expect them to do chores in return for a small payment. Either way, pay them in cash and then help them allocate those funds towards different costs. This is a great time to teach them Elizabeth Warren’s 50/20/30 budget rule.
Warren’s rule is to divide up your after-tax income and allocate it as follows:
- 50% on needs (what you have to spend money on, for example, make them buy their airtime)
- 30% on wants (such as the latest Playstation game)
- 20% to savings
You could charge your children a 10% tax so that they learn the pain of being taxed early on.
This will also open up the discussion about learning to differentiate between needs and wants.
Play money games
Learning can be fun. Include money games like Monopoly and The Game of Life in family time.
Monopoly is a game of luck but players also learn valuable lessons about the balance between spending and saving.
The Game of Life starts each player out with a sum of money and as you advance through the game, you quickly learn that the players who choose to study are likely to have higher-paying jobs and finish life on a more secure financial footing.
Take your children grocery shopping
This is less about the treats they can sneak into the trolley and more about teaching them to compare prices and shop wisely. Sometimes buying two 500g packets of pasta can work out cheaper than buying a 1kg packet of pasta.
The lower-priced items are usually placed on the lowest shelves while the higher-priced items are at eye-level. When you spot a 'special' sign, find out what the special is – sometimes, it’s simply the regular price with a special sticker on it.
Teach them about opportunity costs
Children are typically wired for instant gratification. Opportunity cost is simply the consequence of your financial choice, but very few people, let alone children think this far ahead. Spell it out for them until they start thinking differently.
For example, if you spend your money on this video game, you won't be able to afford the wireless keyboard you wanted to buy next month
"In an age where we pay accounts online and make purchases at the supermarket with a piece of plastic, children don't get to understand the value of money. Children need to learn that even though they can't always see it, money is real and it doesn’t grow on trees, or out in cyberspace for that matter," Steward concludes.
Submitted to Parent24 by Budget Insurance.
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