WeeklySA_AdminLITERACY: Early training readies kids for adulthood economic decisions
By Isaac Moledi
Some few years ago, a friend’s four-year-old collected a toy from our local store and asked his father to buy it for him. The response from his father was that he did not have such a lot of money to buy him the toy. The child looked at his father and said: “Just go to the bank and they will give you money.” Overwhelmed, I looked at the young lad and asked him why his father should go to the bank and asked for money for his toy. The boy then replied, “What are the banks for? Are they not meant to give people money?”
I then realized there and there that maybe at that age; it is important for parents to teach their children about money – how it is made and for what purposes it is for. After all, as parents, we want the best for our children. But this should not necessarily mean we want them to have the best clothes, the latest toys or even the coolest gadgets to play with, but that they should know that money does not grow on trees or that one can’t just go to the bank and demand it.
Financial gurus also believe that it’s up to every parent to teach his or her kid “smart financial habits” and how they make their money in order to lay a good foundation that they can build upon and to do well in life. Though financial Illiteracy is a global phenomenon that affects not only children but also individuals, families, and communities, experts say a lack of it from that young age can also affect the economy and eventually spread out globally.
The experts believe that the lack of financial savvy among children may not fully prepare a young person for later years to face real-life economic decisions like buying a house, understand workplace benefits, investments, or saving for retirement. The South African Savings Institute (Sasi), an independent non-profit organisation dedicated to developing a robust culture of saving in South Africa, says it is important to make your children money wise. “There is more to teaching children about money than just giving them pocket money,” says Sasi’s Gerald Mwandiambira, adding that teaching your children to save, and the value of money is one of the most important lessons for anyone to learn,
The organization believes that lessons about money should start at a preschool age. “As soon as children can count, introduce them to money,” Mwandiabira says. “Take an active role because repetition and observing others are the two methods they learn by. Parents need to try and instil money management as more of an ingrained habit and attitude towards money, rather than just learning the facts about finance.” .
He says without a working knowledge of money, it is extra-ordinary difficult to do well in life.
Brett Mackay, investment consultant and group retirement annuity manager at 10X Investments, says parents should teach their children about financial concepts like investing for wealth and taxes by setting up a tax-free savings investment for their children as soon as they are born.
“Ideally, aim to invest as close to the maximum annual allowance of R36,000 as you can manage, and make sure you are not losing a disproportionate amount of the growth to high fees. When they are old enough, you should talk to them about this account. It will allow you to introduce them to a number of financial topics like investing for wealth, reading the small print, compound growth, and keeping an eye on costs,” he said.
Mackey adds that it’s also important to talk to children about taxes and what to expect when they one day start working. “Some people never understand taxes, why we pay them and why certain expenses – such as saving for your retirement – attract tax relief. It is a real pity that many taxpayers never get the leg up that tax incentives give because they don’t engage with them.
“In our credit-mad society, parents should teach children that credit has a role to play in a responsible financial plan, but its use should be managed carefully. They should understand the difference between big, value-adding purchases, such as an education, a home or even a car, and nice-to-haves, like dinners out and new clothes,” said Mackey.
Sasi provides some helpful tips to teach the future generations the value of money, and the importance of savings.
Saving
– Get a piggy bank or a jar – preferably one that’s transparent so children can see the money adding up. This is more meaningful for younger children who can’t add or count that well, so they have some sense of moving toward that goal.
– 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. Also, check if your local branch holds any special programs or tours for children.
– Let them choose their own savings goals: It may sound like a good idea to have all of your child’s savings go toward education, but little children can learn a lot from setting short-term goals that are fun and meaningful to them. The payoff shouldn’t be too far in the future and unattainable.
– Consider savings and spending guidelines: Some families have children set aside a certain percentage of their money for savings. If you do so, make sure to give the children money in small bills—and ask their grandparents to do the same when giving cash gifts.
– Model good spending and saving habits: As parents, we have the biggest influence on the way children save or spend. If you’re telling your child to be wise with money but you go out to buy the latest phone or trendy fashions, what message are you really sending?
Spending
– Show them the money: Adults may transfer funds electronically and pay with credit cards, but youngsters will understand money better when they see actual bills and coins growing up. You will have to consciously make sure you’re your child understand cash as the basis for learning more about money later. Even though their generation may not use cash, they need to see there is a tangible object. Teach then the experience of paying: If you’re stopping for a snack after school or day care, give your child a few rands and let him or her make their own choices. He will quickly learn the difference in the value of a small bag of chips and a large one.
– Teach them the difference between want and need: Talk to them about how commercials and advertisements are designed to make them feel a need for the item they are selling.
– Ask them: What’s it worth? It’s okay to let them buy some cheap items, but also point out which of their play things last longer or hold their interest better.
– Compare prices with older children: If you are shopping for a new TV or computer, ask your child to help look at sales flyers or search for the best deal online.
– Let your children learn from experience: The best lesson is where children start to learn the value of things and to make smart choices
