How to secure your child’s financial future

Securing your child’s financial future has never been as important as now, especially since a recent Sanlam survey of 5 000 South Africans revealed that people do not make the right money moves at crucial stages, resulting in massive gaps in their financial planning.

Giving children a solid financial foundation is a vital part of parenting and one of the best gifts you can give your child for their financial future, says Danelle Esterhuizen, head of innovation and design at Sanlam. Many parents are unsure where to start or what steps to take to teach their children about money.

“Figuring out how or when to start discussing money with children can be exceptionally challenging, especially for the older generation for whom this subject might once have been considered taboo. However, the sooner parents talk to their children about money, the more likely it is that they will set them up for a successful future.”

She shares these tips to help parents start the financial conversation early and make it fun:

Encourage saving from an early age for their financial future

Encouraging your children to save early is one of the most important financial habits they can develop. You can promote this habit by rewarding your children for saving by, for example, matching every R100 your child puts away with an extra R50 to make saving more lucrative while teaching them the value of money and patience. The Sanlam Savings Jar app is a fun, free way to gamify positive savings habits, including a dragon sidekick.

ALSO READ: Educate your children about money – here’s how

Motivate them to follow the example of successful family members

Sharing successful family financial stories is a practical way to teach your children about smart money management. Identify a family member who made wise financial decisions early on and share their journey through a relatable family story. To demonstrate the impact of wise financial decisions over time.

Help them track small expenses

It is easy to track considerable expenses such as car and house payments, but helping your children keep track of small costs, like buying a cooldrink daily, will plug any future financial leaks they may develop.

“A great way to get kids into healthy money management habits and avoid ‘leaks’ in the budget is to pack juice or water in their school bags to avoid spending at the tuckshop. Let them save the money they would have spent for something they really need or want.”

ALSO READ: Investing on behalf of your kids can ensure their future and their happiness

Openly discuss debt and financial future

Discussing debt is another crucial aspect of financial education. To make this concept more relatable to younger children, use board games like Monopoly to showcase the consequences of borrowing. “When my children were small, I found that using board games to teach them about debt was very effective. For example, we would bend Monopoly rules to accommodate borrowing money to buy a property or even pay someone.” 

Take a hybrid approach to money

Complement digital tools with tangible systems such as the ‘envelope method’, where children allocate various amounts of money into envelopes for different purposes. This approach will help children grasp the concept of budgeting and the value of physical cash. Feeling the weight of a single R1 coin versus ten R1 coins is a wonderful way to learn.

“Studies identified the ‘cashless effect’, which describes our increased willingness to pay more for products when no physical money exchanges hands. Therefore, when parents give their children pocket money in cash and help them allocate various amounts into envelopes for toys or saving towards holiday spending, they can touch and feel the money and appreciate its value.”

ALSO READ: How to teach your children to save and invest

Lead by example

It is important to lead by example by acknowledging what you do not know and getting the help you need to instill money management fundamentals in your kids, especially if you did not receive adequate financial education growing up.

“We do not say parents must be entirely transparent with their children about their finances, but they can involve them in some important aspects of their financial journeys, such as why you cannot go away for grandpa’s birthday and also take a family break the very next weekend. Parents can access financial tools online to help them navigate the journey to empower their little people to live a life full of financial confidence.”