Teaching your kids about money and saving is one of the most important life foundations a parent can pass down to their children. No parent wishes to see their child making the same mistakes as they did when starting out their adulthood. By honouring your children with this valuable lesson, you provide them with the opportunity to avoid these mistakes.=
You should also think of this as financial self-defence. Reckless spending children with back-breaking debt are a great risk to you. You will likely have to ride to the rescue and their financial predicament will now be yours which places the family’s financial wellness at great risk.
By teaching children about money will teach them where it comes from, how it should be spent, and most importantly the value thereof.
A supervised monthly allowance will assist your child in learning that saving is an important part of financial security. When Thomas, age 10, saves up to buy his new skateboard, he will understand its value and appreciate it more and most likely take better care of it.
Teaching kids about money from an early age will afford them the opportunity to make mistakes now instead of later i.e. with cash, over spending, credit and savings. This will ensure they are more cautious when they are older.
Impulse spending is one of the biggest causes of financial difficulty for today’s adults. Continuous coaching on money matters will prevent the impulse spending habit amongst adults.
When a child considers the consequences of their actions with money, it develops their decision making skills.
Moneywise children are exposed to the real cost of items and will have a better understanding of budgeting and pending in a money-conscious world.
Finally, all lessons about money are of utmost importance to your child, as it will ensure your child knows how to treat money and improves their chance of being financially secure in their adult life.
Herewith some guidelines to raise moneywise kids categorised according to age groups.
Age 3-5 : Prepare them
- Use coins to teach them how to count.
- Discuss choices with them when shopping i.e. why you are taking that item instead of the other.
Age 6-7 : Introduce an allowance
- Use a piggy bank or jar for coin saving. They will see how their money grows and put saving into perspective for them.
- Teach them to set goals for saving, spending, and giving.
Ages 8-10 : Introduce saving and investing
- Increase responsibility for personal expenses. Have them use their own money for movies etc.
- Develop a simple in-house banking system. Should your child wish to purchase a certain item and haven’t managed to save enough yet, you can lend the balance to them, but charge interest in order to teach them how expensive it can be to borrow.
- Open a savings account in his / her name to teach them about interest.
- Assist them in setting financial or savings goals and simple budgeting exercises.
Age 11-14 : Expand their horizons
- Consider changing the allowance to a salary concept.
- Involve your child in family budget discussions.
- Develop long-term goals i.e. a car.
- Emphasize the importance of responsible spending.
Age 15-18 : Prepare them for adulthood
- Update their budget and add expenses such as clothing and toiletries.
- Open a cheque account and teach them how to handle a debit card.
- Teach them the importance of maintaining good credit.
Throughout these different stages it is important to emphasise the difference between a need and want. The sooner they understand these concepts the sooner they’ll become skilled at using their money to cover their needs. Your children must further understand that there are thousands of companies trying to get to their money. Teach them to recognise and resist the temptations created through advertising. By following these guidelines you will promote your child’s financial wellbeing.