'It's important to start the money conversation very early in a child's life.' ~ iStock
In a world loaded with influences from the media, it's important to get children to learn how to manage their money before they are misguided by other information they have access to, warn the experts.
For Lance Solms, managing director
at Itransact, being a responsible parent means more than just
playing catch and reading a bed time story - it involves being there for
your children and giving them the best possible start in life. It also means providing them with valuable financial lessons
they can use when they are ready to leave the nest.
your children with sound financial advice early on and building a strong
foundation, you are not only securing a sound financial future for
them, but also possibly eliminating financial burdens," says Solms.
FNB Wealth and Investments product specialist Ester Ochse agrees, adding that it's crucial to instill good habits in children when it comes to
"Once a child has pre-conceived ideas of how money
management supposedly works, it may be difficult for parents to entrench
their preferred principles… it's important to start the money
conversation very early in a child's life.
children about managing money needs to be a practical exercise instead of a
conversation once in a while. This will raise awareness of important
principles the child can adopt," Ochse explains.
Solms and Oche shares eight tips parents should give their children for a secure financial future:
1. Household budget
"Whether it’s weekly or monthly, all families that earn income must ensure that every rand is dedicated accordingly. Get
your children involved in this process and give them adequate
responsibilities to make every rand go a long way," says Ochse.
2. Be realistic
Time spent developing a budget is time well spent. Creating
and sticking to a budget will allow your children to determine in advance
whether they will have enough money to do the things they need or would
like to do, says Solms.
Teach your children to not spend more than what is in their pocket, and to be realistic about their needs and wants.
Knowing the difference between a 'want' and a 'need' can help save money, as many
of the items children spend money on are things that they want rather than
need, adds Solms.
Osche advises parents to start
introducing educational exercises to help their children appreciate that "money doesn’t grow on trees". This could be small tasks where they get
incentivised upon completion.
4. School trips
"Schools often plan trips or learning excursions to places such as the local zoo or museum. "While
it’s the responsibility of the parents to plan for this financially,
there’s no harm in allowing your kids to help in managing the savings
kitty for this," adds Ochse.
5. Family vacations
Osche acknowledges that not
every family may have the resources to go on a vacation now and then,
but where possible, parents can task their children to manage holiday
savings, especially if it’s a destination that the children are looking
forward to visiting.
6. Start early
Solms takes it a notch up, advising that as soon as children finish school and either go study or work, they should plan on seeking professional advice for when they get their first pay cheque.
He says the younger the start, the less
likely the youngsters will be inclined to have burdensome financial obligations.
The power of compound interest is also much more impactful the sooner you start saving. So, it's wise to establish
a retirement investment vehicle early in your working life to allow you to allocate a portion of your investment portfolio to
higher risk investments, which may yield higher returns.
to invest before financial commitments begin piling up, means you’ll
probably also have more cash available for investing and a longer
horizon before retirement. With more money to invest for longer, you'll
have a bigger retirement nest egg."
7. Explain the money jargon
financially educated takes us a step closer to being savvy and
responsible with our money. With so many different offers on the market,
it can be difficult to cut through the financial 'jargon' and make
sense of what's best for managing their money.
the meaning of terms such as ETFs or interest repayments on an overdraft
can really impact their financial futures.
8. Avoid loans, save and pay cash
As we all know, borrowing money can land a person in serious trouble – just as savings can accumulate interest, so can debt.
your children to stay clear of taking on bad debt as far as they can: "rather encourage them to save towards that set of drums or a decent deposit for a new car".
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