By Thami Cele, Head of Savings & Investments, at Absa Retail and Business Banking
To avoid the next generation making bad financial decisions and to help them enjoy financially fit lives, children need to be taught the essentials about money. If you’re a parent, this doesn’t mean filling your child’s head with financial facts and figures, but rather offering them age-appropriate money lessons. It’s never too soon to start either, as research by bestselling author Beth Kobliner in her book Get a Financial Life reveals that children as young as three can grasp financial concepts, particularly around saving and spending.
Good financial skills are vital to ensure we are able to get through life as adults without too many pitfalls. From making a savings plan to guarantee security after retirement or as back-up in case of emergency to avoid falling into a cycle of debt, a healthy understanding of the concept of money is essential and it is important to start implementing these learnings from a young age.
If you are a parent, here are five simple ways to teach your children about saving money:
- Get a piggy bank
This form of savings is more meaningful for younger children who can’t add or count too well. Keep the savings visible: you can try the old jam jar system as a savings mechanism for both short-term and long-term savings and allow them to even draw pictures to illustrate what they are saving for – like a toy guitar or teddy bear for short-term saving and perhaps a trip to an exciting destination for long-term purposes.
- Take them to a bank to open their account
This helps youngsters understand where their money is going and introduces them to the concept of financial institutions. In doing so, you help your child prioritise short-term and long-term savings.
- Model good spending and saving habits
As parents, you have the biggest influence on the way children save or spend. Examine your own spending habits: next time you dash out to get the latest designer handbag or shoes, ask what message you are really sending to your impressionable children.
- Show them the money
We have to remember that children today don’t see cash and financial transactions the same way we saw them when we were growing up, so we have to consciously make sure that children understand cash as the basis for learning more about money later. When giving children an allowance or income, give the money in denominations that encourage saving. For example if the amount is R50, give out five R10 notes and encourage that at least one be set aside for savings.
Also talk about money in front of your children. Many people avoid this, but if you have healthy discussions about money in front of them, they are more likely to develop the right attitudes towards savings.
- Teach the difference between a want and need
Talk to them about how adverts are designed to make them feel a need for the item they are selling – and how to differentiate between what they want and actually need. It will stand them in good stead when they are adults.
Teaching your children how to save is an important step to prepare them for financial responsibility and a secure future. But it won’t go very far if you don’t “practice what you preach” and save for the future yourself. Whether we like it or not, most of us take after our parents and emulate the habits we observed in them during childhood. In other words, you need to start acting how you want your children to act when they grow up.