Eight top money tips to teach your children

Lameez Omarjee
2018-07-01 13:21
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 '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.

"By equipping 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 money.

"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.

"Teaching 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.

3. Chores

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.

"Starting 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

Being 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.

Not understanding 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.

Teach 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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