How people save, spend, and invest their money is influenced by what they see modelled to them when they are younger, which in turn can have an impact on their financial habits and decisions.
Head of marketing at M&G Investments, Sumayya Davenhill said it was important for parents to provide a strong foundation for their children early on to help them build a better relationship with money and manage their finances efficiently.
Ilse Smuts, product growth head, FNB Cash Investments said that there is a common assumption that parents need to be an expert in finances to teach their children about money, but that is far from the truth.
Aneesa Razack, CEO of FNB Fiduciary recommends that parents add a bit of fun and creativity when teaching their kids about money.
“Being creative in your money management lessons will help in driving the importance of money to your kids and this will also help them remember in years to come,” Razack said.
Razack and Smuts shares the best practices when teaching children to manage money:
Talk to your children about money
Parents should use practical day-to-day scenarios to help their children understand the concept of money or money management and try not to overwhelm them with information.
Show your children how to map out a budget
Getting your children involved in the monthly family budget together is a great start to help kids track where their money is going.
A child’s budget should include their savings, expenses and those events that they enjoy doing like going to the movies or purchasing toys.
This budget will be the ultimate blueprint which will help guide you through each month and year. Through this process you can help teach your children the difference between needs, wants and responsibilities.
Make savings a family project
One of the easiest ways to get the savings project started is with their pocket money or their monthly spend allowance – if your budget allows.
Set goals and encourage each family member to save up for your family project – such as a Mother’s Day, Father’s Day, or birthday gift for siblings. Savings don’t have to be for something specific all the time.
Help your children open a bank account or an investment account
Encourage your children to put their money into a savings account. This will allow them to track and make sure their money is safe. They will also learn about compound interest and growing their money.
You could also expose your teenager to investing in Unit Trusts, Exchange Traded Notes or shares for as little as R10 from global brands such as Apple, Amazon, Facebook and Netflix.
The tax-free savings account is an investment vehicle that parents can get for their child to supplement his/her retirement. A sizeable tax-free investment portfolio will give children a head-start in life.
Instil a habit for savings and reward
It is critical to instil in children the idea that pocket money must be earned and isn't only for spending, they must save their money.
Parents should get their kids involved in household chores like dish-washing and give them rewards based on how well they perform to encourage them to learn the value money and how to use it wisely.
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