How do I teach my son about money?

How do I teach my son about money?

2010-11-08 16:43

HOW can you give your child a solid financial grounding? Concentrate on conversations, an expert says.

A user writes:

My son (20) has had a rough time growing up, but he really needs to learn how to work with money.
He is currently working in my husband's business and earns R40 per hour.

His car is paid by us, he receives two tanks of petrol per month and my ex-husband pays him an allowance of R1 800 per month, which he uses for rent.
He has a girlfriend, whose family is going through a divorce, and he takes care of her financially from time to time.

What programme can we put in place to let him understand how money works?

He is a big dreamer, has a soft heart and cannot say no. And he loves brand name clothing.

Jason Garner, acsis financial planning coach, responds:

Statistically, 94% of South Africans will not be able to retire comfortably so as a generation, most of us are going to be drastically affected by our failure to make better financial decisions.

It is therefore critical that we not only do our best to improve this statistic by changing our own behaviour, but that we also teach the next generation so that they can avoid the fate we possibly face.

That being said, we are increasingly finding a culture of instant gratification driving people young and old.

This culture, along with a history of not saving and investing in our future, is surely a recipe for disaster.

I for one certainly get my hopes up when I read questions like the one you have posted, as at least some of us are aware that a problem exists and that we need to be addressing it, even if we are not sure how to do so.

Firstly, the best way to assist the next generation is by making sure that your own affairs are properly taken care of.

This will set the tone for your children when it comes to finances, retirement goals, etc. It will also ensure that you will not become a burden to them in your old age.

One way to do this is to have open financial discussions in the family. Too many people seem to think that financial discussions are taboo in the home, and they are therefore avoided like the plague.

Actually, the best way is to be open around the topic and certainly to include your children in the family budget and saving discussions. You should also develop a relationship with a well-qualified financial planner who can assist not only in your personal education but that of your children too.

These open financial discussions with your children will become even more important as they grow up and become more financially independent.

You talks should be more about you asking your children what they are hoping to achieve financially, as opposed to you telling them what you think they should be doing.

The best way for having these kind of discussions is to build them around a framework.

Below is a suggested framework:

  • Current reality

What is the current financial situation that you find yourself in? What does your budget look like? Do your expenses outweigh your income, etc? What are you doing well, and in which areas could you improve?

As soon as you understand this, you have a starting point for the discussion to progress. Once more, it is important to make sure that these things are not your opinion but what the other contributors say. Try to refrain from doing too much of the talking - rather ask questions and listen to the answers.

  • Aspirations

This is really about discovering what your child wants to achieve going forward. Where does he see himself? What does he envisage doing, and what are the things he would like to achieve?

While goals may be short-, medium- and long-term, the important thing here is that we get an understanding of what it is our children see themselves doing in the future, and the financial consequences of those aspirations.

  • Build a strategy

Now that you know your children's current reality and aspirations, you can have a constructive discussion about how they see themselves getting there.

Once again, it is important that these strategies are those of your children, and not yours for them, so be careful not to tell them what you think they should do.

Rather provide them with options of how they could get there and then let them choose the strategy that suits them best.

  • Implement the plan

Once a strategy is chosen, get your children to commit to implementing it.

If this means saving more or spending less, provide them with options and then get their commitment to implement the strategy.

The failure to implement is very often the failure of any plan.

So once you have their commitment to make the relevant changes, make sure they stick to them.

Have a conversation with your children as soon as possible about their financial affairs and bring in the right experts to help you if needed.

The earlier the next generation starts making the right financial decisions and taking responsibility for those decisions, the better for them and for us.

  • chris - 2010-11-10 13:02

    teach the kids to do a budget, on paper. then they can see how far the money will go! they may not stick to the budget but at least they will understand how they got intto trouble. eventually they will stick to it.

  • alan - 2010-12-02 17:49

    We need to seriously consider alternative ways of teaching kids ( and adults, for that matter) about money.A sizeable proportion of school-going kids and young adults play computer games and/or cellular phone games.It makes "sense" then that these mediums are leveraged to teach kids, in particular, in a fun, engaging, immersive manner.People learn by doing and games provide an ideal forum within which kids can learn something as vital as financial literacy.

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