Money management 101 for kids. Image: iStock
Society has become accustomed to seeking instant gratification and unfortunately, South Africans are often dubbed materialistic and steeped in debt. The Covid-19 pandemic saw many of us learning the hard way when it comes to the management of our money, which is why it is now also the ideal opportunity to teach our kids to do it differently in order to be better prepared for the unexpected.
According to Christelle Louw, an advisory partner at Citadel, an SARB study has found that the average South African spends 70% of their income on debt.
Louw says it is important to encourage children to start managing their money early on.
“Parents normally want to provide their children with the benefits and advantages they never enjoyed themselves, and unwisely lean towards material things and spending a lot of money on their children’s instant gratification. But, the biggest gift they can bestow on their children as well as on their own future, is the long-term rewards that grow over time.”
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According to Louw, parents should teach their children the principles of wise financial management, getting them practically involved in budgeting and saving, demonstrating the gains that are made and the solid foundations being built for their futures.
For starters, consider opening a savings plan to which you as parents contribute the same amount than the amount the children save. Seeing the amount grow will encourage children to save more and it will also help them understand what the concrete benefits of these savings will be in the long run.
READ: How a budget can help you reach your savings goals
Children are being exposed to materialistic things through social media all the time. This is a great opportunity to counter that, by explaining the difference between being rich and being wealthy to them.
Being rich can be linked to mostly spending cashflow, looking the role and seeking the limelight. Wealth can be described as the accumulation of assets which is less spectacular and showy on the surface but has solid and reliable results. Therefore, teach your children that long-term stability counts much more than a visibly, flashy social status.
One of the golden rules to teach your kids is not to spend what they don’t have. Teach them to plan ahead instead of loaning money from dad. And, allow them to reward themselves when they have reached their financial goal.
The words travel, good education and satisfying lifestyle often sit well with teenagers. Remind them that with savings, they will be able to travel, enjoy university to a greater extent and perhaps even buy a car.
“Having options and choices is a very powerful motivator,” says Louw, and having them in these uncertain times has actually become a necessity.
As parent, it is your responsibility to guide your child when it comes to financial planning and wise money choices. They might not need a financial planner just yet, but helping them create long-term strategies (not quick fixes) might guide them in the right direction. Talk through their monthly needs with them and help them find ways to finance both their short- and long-term goals. This will create a strong basis for them from which they can devise a financial strategy.
Remember to teach your children to steer clear from splurging on temporary pleasures and to rather create a proper financial plan that will allow them to reap the benefits in the long run.
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