Parents should be serious about teaching children basic money concepts while they are still young – it could ensure they have financial success later in life.
“South Africans must prioritise creating good financial habits from an early age. We have an alarming youth unemployment rate of 46.5% and a generally low savings culture and it is becoming increasingly important to teach our youth the basics about money, saving and investments.
“The sooner young people start learning positive financial habits, the better equipped our future generations will be,” Claire Klassen, consumer financial education specialist at Momentum Metropolitan, says.
“Children learn from seeing and doing more than they learn from theoretical knowledge. The key is to teach them about money, saving and spending in simple terms to ensure they understand and adapt their approach as they grow older and their financial needs evolve.”
Seven tips how to teach children financial literacy
- Lead by example: Children learn from observing their parents’ behaviour. Practice good financial habits yourself, such as budgeting, saving and making informed spending decisions. Show them how to be responsible with money. Help your children understand the concept of needs versus wants and encourage them to allocate their money accordingly.
- Save and set financial goals: Encourage your children to set savings goals. Teach them to save a portion of their income, whether it is from allowances or part-time jobs. Help them understand the value of delayed gratification and the benefits of saving for future needs or wants.
- Introduce them to banking: Teach your children about basic banking concepts, such as opening a savings account and managing it. Explain the concept of compound interest and how it can help their money grow over time.
- Involve them in financial decisions: As appropriate, involve your children in financial decisions for the family. Discuss major purchases, budgeting for vacations, or saving for a big-ticket item together. This will help them understand the decision-making process and the trade-offs involved.
- Teach them about debt: Explain the concept of responsible borrowing and the responsibilities that come with it. Discuss the differences between good debt (investing in assets) and bad debt (credit cards and clothing accounts when used irresponsibly). Emphasise the importance of responsible borrowing and the consequences of accumulating too much debt.
- Encourage entrepreneurship: Foster an entrepreneurial mindset by encouraging your children to explore their interests and hobbies. Teach them about creating and managing a small business, including budgeting, marketing and customer service.
- Teach them the value of giving: Incorporating giving into financial education helps cultivate a balanced financial life that includes not only personal financial goals but also contributing to the wellbeing of others. Children who learn to share their resources and give to others experience the joy of helping, which can lead to a lifelong habit of giving back. Learning to allocate funds for charitable purposes also teaches children to prioritise their spending and make conscious decisions about where their money goes.
“Early financial education is crucial for breaking the cycle of poor financial decisions and increasing financial literacy. By proactively seeking resources and empowering yourself and your family with knowledge and practical financial habits, individuals can increase their financial literacy,” Klassen says.