Financial education for children is a must!

How do we expect our children to make the correct financial decisions when they are not being adequately educated about money?

Most children learn from what they see – and right now that entire picture looks pretty bleak.

South Africans have a notoriously bad savings record, our consumer debt runs into trillions of rands, and more and more people are defaulting on their debt repayments.

We are not setting a good example for our children.

That being said, it isn’t as if parents don’t want their children to become more financially savvy.

It’s just that most times, as adults, parents are not even aware of their financial options and rights.

Shafeeqah Isaacs, head of financial education at financial services provider DirectAxis, canvassed some of her colleagues with children of different ages about some age-appropriate lessons to help kids become financially responsible adults.

Here are some of her money tips:

Age 3-5: You can’t always get what you want, right now.

We live in an era of instant gratification, from takeaway foods to online shopping.

While your three-year-old isn’t likely to be ordering Uber Eats yet, teaching children early on that some things are worth waiting for may prevent them racking up credit card debt on trendy clothes or the latest tech later in life.

Set attainable goals. For example, if your child wants a particular toy, explain they’ll have to save for it.

Have a savings jar or money box into which you can put birthday money or small rewards for helping out, good behaviour or achievements.

Try to set them up for success by making sure the goal is achievable and they don’t have to wait for months and thus lose sight of what they’re saving for.

Each time your child adds money to the savings jar, help him or her count it and work out how much more is needed to reach the goal.

Age 6-10: You’re responsible for the financial choices you make.

You can teach your children the basics of financial decision-making by explaining financial priorities.

For example, you can tell them how, when you get paid, you first need to pay bills such as the home loan or rent.

Then you need to buy groceries.

If you do this carefully and don’t spend money on things that are too expensive or which you don’t really need, you’ll have some left over.

Some of this you can save and some might be used to do something fun together.

Ages 11-13: The sooner you start saving the sooner you’ll reach your goals.

At this stage you can introduce the idea of saving for long-term goals. Perhaps set a goal for something more expensive that he or she really wants.

Often at this stage children are reluctant to save because they want to buy things such as data and airtime.

By setting a bigger goal you can teach them that the opportunity cost – what they need to give up – will enable them to save more and reach their goal faster.

Of course, when saving larger amounts of money, it’s sensible and safer to replace the money box or savings jar with a bank account.

Ages 14-18: Understand how to borrow sensibly.

As they get older you can teach them the difference between good and bad credit, such as loans to fund tertiary studies or start a business as opposed to borrowing money to fund an unaffordable lifestyle.

As a parent, teaching children about money isn’t something you’ll ever stop doing. Perhaps the most important lesson of all is to remember that you are a role model.

“If you’ve ever heard a child use a grown-up word or expression they didn’t learn in school, you know they suck up everything around them.

“The same applies to how they learn about money.

“Remember that and the influence you have not just in terms of what you teach them, but your own financial behaviour,” says Shafeeqah.

Financial education is vitally important.

It saddens me to see young adults three months into their first job getting enticed into debt.

They end up spending their entire salary on monthly debt instalments because they didn’t know how credit works.

They make no provision for the future (in terms of pension contributions, policies, investments) and much less for the necessities of the present.

It is vitally important that children know the following basics:

• There is a difference between wants and needs. Do not let the culture of instant gratification blur the lines on this.

• Food is a “need”. But expensive fast food is a “want”.

• Clothing is a “need”. But designer brand names are a “want”.

• Budgeting may be boring, but it is an important tool in the management of your money.

You don’t need expensive computer software to draw up a budget either.

You can simply click on the link below to get access to financial tools and calculators:

https://www.directaxis.co.za/tools-and-calculators

Most banks have free budgeting apps for their clients.

But using pen and paper and drawing two columns simply marked (monthly) INCOME and EXPENDITURE works just as well!

Saving for the proverbial “rainy day” is a must. Look at how many people had their entire lives turned upside down when Covid-19 and lockdown first hit SA.

Don’t make unnecessary debt – especially not to keep up with the Jones’. The Jones’ are struggling too!

If you can download a social media app, you can download a banking and a budgeting app.

If you have data to watch TikTok videos, then you have data to find financial information online.

The financial education of our children now will lead to their financial freedom in the future.

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