Being able to manage money is an essential life skill, so it’s important to share this know-how and teach kids about money from an early age.
Finance guru and founder of Money Savvy Kids, Kathryn Main, says that parents can curb the instant gratification ‘spend-now, pay-later’ mentality in children from an early age.
Here are five ways to teach kids about money management:
1. Start early
Parents are the biggest influencers of children, yet studies show there is very little engagement in SA households between parents and their kids around savings, money, and financial literacy.
‘Some studies show that 74% of the youth are not involved or included in the daily financial management of their household. However, children who are involved display a higher propensity to save, more cautious spending behaviour, and a better understanding and knowledge of financial products,’ says Kathryn.
2. Make it real
‘Teach your children about money in a tangible way,’ advises Kathy Longo, a certified financial planner and author of Flourish Financially.
‘With contactless payments on the rise, you may rarely use cash but it’s important that children get used to handling coins and notes. Let them pay in shops with cash regularly and count the change. Give them pocket money and let them make their own mistakes.’
3. Work together
Get your children involved in the family’s budgeting. ‘By high school, children should have an idea of what things cost,’ says Kathy.
‘Once they have a concept of a budget, involve them in some family spending decisions.’
4. Keep it interesting
Try to refrain from buying your kids all the new gadgets and toys they want, and talk to them about the reasons why they want them.
Once that’s established, encourage them to save for the item themselves – they can buy the new soccer ball they have their eye on now or save for a month to afford the more expensive video game.
‘Young children tend to have a shorter patience clock compared to older children so the recommended time frame is three to six weeks for kids below the age of seven, and between three and six months for kids older than that,’ explains Kathryn.
5. Avoid the pitfalls
Common pitfalls that can lead to kids blowing the budget include the temptation of the school tuckshop, and a desire to keep up with friends.
‘Simply setting a budget for their tuckshop and weekend excursions can have them changing their spending patterns for the better by making them think about where, when and how much they have to spend (or save) until the next allowance is due.’
‘They will learn to cut back on spending, learn the true value of money and the skill it takes to balance it with their wants and needs in later life,’ says Kathryn.