Blog April 15, 2015

Teaching your children about money

Mr Money Mustache is a light-hearted blog that gives advice on how to retire by the age of 30. Most people only start saving around this age, and can only comfortably – if at all – retire by 65. This means that it’s your responsibility to teach your children how to be financially savvy. Here’s how to secure your children’s financial future, paving their way to early retirement.

Be a financially savvy parent

As a parent, it’s your responsibility to be a bastion of money sensibility. If you set an example of wisely managing your money, your children will (hopefully) follow suit. This includes things like paying the full balance of your credit card off each month (and not just the minimum balance owed); not buying luxury items on credit and saving and wisely investing. This could mean growing a vegetable garden to save on grocery costs, or shopping at charity shops. In a consumerist culture, where money and luxury is associated with a higher status, it is difficult to be frugal, but teaching your children to be exactly that, and still enjoy life, is a priceless gift. Mr Money Mustache has excellent tips on how to be frugal and still enjoy life.

Know that the best things in life are free

Children need stimulation for their development, but a lot of this involves spending money on them. While it may be easier to download the latest iPad app to keep them quiet and give you peace, doing so adds up financially.

It‘s not always possible to do things for free, and you will have to budget for them. However, with a little imagination, anything is possible. Failing that, go for a walk in the park. In South Africa, the weather is amenable enough for year-round outdoor activity. Getaway magazine gives a long list of free things to do with children.

Delay instant gratification

A three-year old child can be taught to wait his turn and stand in line. Thus, they can be taught to save for something they like, rather than be given it instantaneously. The best way to do this is to get them to set a goal, such as buying a pirate outfit. They can put pocket money in a jar until there is enough. The trick is that their ‘purchase goal’ shouldn’t be too expensive, otherwise, they may have to save for a very long time, and then lose interest. But if it is an expensive goal, such as saving for an iPod, then help them reach it in a manageable timeframe.

This is valuable advice from South Porte Bank:

“Every time your child adds money to the savings jar, help her count up how much she has, talk with her about how much she needs to reach her goal, and when she will reach it. All those behaviours are really fun for kids, and it gives them a sense of the importance of waiting and being patient and saving.”

Include a spending and sharing jar

Apart from a savings jar, children could also have separate spending and sharing jars. Some of their pocket money can be for spending on sweets and a movie, while some of it could be given to a charity, such as the SPCA. A saving jar is for the more expensive items.

Include your child in some financial decisions

If your child goes shopping with you, tell them you are buying a no-name brand rather than a branded one, because it is cheaper (and still tastes the same). In addition, do your research as to where grocery shopping would be cheaper – whether at Checkers, Pick n Pay or Woolworths. Share your findings with your child.

The “Do we really need this?” question is an important one to ask your child. In addition, questions like “Should we be buying this since we have also planned to go for dinner?” and, “Could this be cheaper at a discount shop?” are equally instructive.

Put a limited amount of money on a prepaid card

Giving your child a prepaid card is a helpful budgeting tool. By putting a limited amount on the card for school lunches and other treats, they’ll learn to plan ahead. The benefits of prepaid cards are numerous: they are safe because they are cashless; there is no chance of getting into debt; the fees are low; a prepaid card can do almost anything that a normal bank account can do. Parents could opt for prepaid cards rather than a bank account for their children.

Paycorp’s prepaid card solutions such as a Reload mobile money card is perfect for teaching kids how to be financially savvy – find out more, here.

Image Courtesy of: BT Insights