Heritage Month is celebrated annually throughout September, providing a sense of identity and belonging. One of the most valuable gifts that you can pass on to your children is teaching them to handle money wisely. This helps establish sound values and gives them a sense of confidence and control around a subject that’s too often fraught with emotion and worry.
From a very early age, children can start learning about the value of money, basic budgeting, and saving towards a goal rather than blowing pocket money on the latest trend. This is particularly valuable given peer pressure and personalised advertising on social media. What are the lessons you should be passing on to your children? Sarah Nicholson, Commercial Manager at personal finance website Justmoney, says much of the literature touches on seven broad principles.
Decide between needs and wants
An early lesson is helping children differentiate between what they’d like to have and what they really need. We’ve all seen ‘pester power’ at work in a till queue with kids demanding sweets and other goodies laid out to tempt them. Rather than say you’re not buying them something ‘because we can’t afford it’, explain that you’re choosing to spend your hard-earned cash in another way. For example, ‘I’m saving money so we can go and visit granny and grandpa in the school holidays’.
Understand the value of money
Using coins, notes and calculators in games is a good way to teach children about the value of money, and also to pass on maths concepts such as addition, subtraction, multiplication and division. There are plenty of suitable board games, or you can make them up. You can show them colourful ‘deals of the week’ ad flyers, and ask them to help you do price comparisons in the supermarket or on an app.
Handle money well
Pocket money is an important step in teaching children financial responsibility. Initially, pay children pocket money once a week. As they get older you can make this once a fortnight and later once a month. This will teach them to make it last.
Money is earned
Building on the lesson about understanding the value of money, children should learn that money is earned, not given. They can earn pocket money for doing household chores such as making their bed, feeding the family pet or washing up.
Learn to save
You can encourage younger children to put away some of their pocket money in a piggy bank each week. As they get older, open a bank account and suggest they try to save some pocket money and also any additional income they may get, such as birthday money or income from part-time jobs.
If they want to buy a big-ticket item such as a music gadget or surfboard, explain how they will need to save for it, possibly sacrificing other want-to-haves. You could match the money they earn or save, or teach them how to manage debt by paying back the cost in installments.
Keep a record
Help children keep track of income and spending in a book or on a spreadsheet. When you pay pocket money, look at the previous month and explain what they did well, or how they might have spent or saved their money better.
Learn from lessons
The biggest lesson they’ll learn is when they splurge on something and later realise that it was a waste of money. Don’t bail them out. Let them make their own plan to supplement their income by doing more chores or getting a part-time job.
“Teaching children how to handle money in a fun and practical way is a wonderful gift to pass on this Heritage Month, and something I strive to do with my own children,” says Nicholson. “When children have sound financial knowledge and good money values, this helps to build up a positive identify and gives them skills that will last a lifetime.”
Justmoney is a personal finance website that provides busy and digitally-savvy South Africans with easy access to financial products, services and information. It does this by partnering with trusted financial brands and creating informative, trustworthy advice. Check it out at Justmoney.