By Dominique Bowen
Parents, listen up. There’s a critical role you play in your child’s life, and it’s not just that of providing a roof over their head, a loving home environment, clothes, meals, healthcare, schooling and much of life’s other necessities. You may be in denial, but your child’s financial education is largely your responsibility, too.
School market days teach and inspire the principle of entrepreneurship, but there is less of a focus on money-handling behaviour. The earlier you start talking to your children about money, the more likely they are to develop good money habits that will stand them in good stead for the rest of their lives, says Stian de Witt, executive head of financial planning at NMG Benefits.
Now, while the year is still young, take the opportunity to see where your child’s financial understanding currently sits, and plot some achievable milestones and steps to achieve them during the course of the months ahead.
Budgeting comes first
Have you ever noticed how your child’s eyes brighten when the topic of pocket money is discussed? Whether they’re receiving it already, or you’d like to initiate a pocket-money programme in your home, put budgeting first: how will the money be used?
According to a study published in the Journal of Consumer Affairs, giving an allowance on its own is ineffective in building a child’s financial skills. The benefits come when they also receive guidance for how to save and budget along with it.
“Help your children set up a simple age-appropriate budget – maybe one third for spending, one third for saving and one third for giving, for example,” suggests De Witt. Once they have their money in hand, hold them accountable by gently asking whether they are following the plan they’d set for their cash.
Perhaps pocket money isn’t in the picture yet. You could still involve your child in a real budgeting scenario by getting them to help with planning a party. Use a symbolic item like straws or building blocks to represent the total budgeted amount for the event, and then guide your child in allocating money within the confines of that set amount. There is a consequence for each spending decision, which is what this activity aims to teach.
Track your young one’s progress with budgeting by entrusting them with higher amounts of real money and bigger budgeting responsibilities as they get the hang of each concept.
Instil confidence in everyday calculations
Your child may not be keen on a maths-based career, but that doesn’t mean they can get out of real daily numeracy and problem-solving with numbers – especially if they are earning and working with money. Now and then, put the restaurant bill in their hand and ask them to calculate the tip. Ask them to calculate the store-advertised savings your grocery choices should be eligible for, and get them in the habit of keeping an eagle eye on the cash register display when it comes to checkout to ensure those savings do, in fact, check out, and to ask why when they don’t.
In fact, grocery shopping is a prime opportunity for lessons. While you’re in the fresh produce section, send your child off to find and bring to the trolley three items, being as economical as they can. I’m intentional about using the word “economical” versus “cheapest”. This gets them in the mindset of looking for great value at a smart price, and taking advantage of deals.
If they can succeed at any of these activities over a series of outings, take the leap and park off for a coffee at a nearby store while they “own” the grocery shop.
Make that money grow!
When your child is on track with budgeting and smart spending, tackle the concept of saving. What this ultimately entails is teaching the challenging principle of delayed gratification. “Emphasise the importance of saving up for things they want, and not going into debt to get them,” says Clyde Parsons, chief innovation officer for BrightRock. “The old-fashioned piggy bank is a great tool to cultivate a savings attitude in children.”
He also notes something we often don’t think about when focusing on the purpose of saving, and that is for a rainy day. Children should understand the concept of saving for expenses that they can’t anticipate, such as a broken mobile phone or a stolen pair of shoes, he says.
There are so many rewards systems that you could implement and track to sharpen your child’s savings wits, like pledging to match their contribution to a savings fund. Alternatively, give them the option to delay their allowance for a day or two, for which they’ll be rewarded by getting an extra financial boost or other reward.
PERSONAL FINANCE