Shivaan is doing everything in his power to ensure his daughter is provided for. But the biggest gift he can give her is to start teaching her practical money skills from a very young age. A Cambridge University study has shown that kids form money habits by age seven, so it's important to start educating them early on and to keep at it. Here are five tips to raise money-smart kids.
1. Make it about more than money
Just as you teach your kids good manners, kindness and honesty, they should know what matters to your family when it comes to money. What are your money values? Other families might be all about fancy labels, but that’s not for your family. Other kids might get a little toy every time they go to the shops but your family rather saves money for a bucket-list holiday.
2. Decide on your approach
Are you going to pay your children to do chores around the house? How much pocket money to give? Should you top it up if it runs out? Should you get a say in how it’s spent? Chat through these decisions with your partner as it’s important to put on a united front so there’s no confusion or manipulation later on.
3. Work smartly with money
From a young age, kids should be taught to budget with the money they receive as gifts or allowances. Experts suggest splitting money into four sections:• Spending: This money can be spent but remember: when it’s gone, it’s gone!
• Saving: Encourage them to set a spending goal (e.g. R200 for a soccer ball) and save up to meet that goal.
• Donating: It’s a good idea to teach them the value of charity – even if they just give a small amount to a person in need.
• Investing: They should also learn the concept of saving for ‘one day’. Once they have a nice amount saved up, open a bank account for them.
4. Tell them where money really comes from
As kids get older, you can also let them in on your own budget and start explaining terms like debt, credit, insurance, etc. Money comes from salaries, yes, but teach kids how to generate an income in other ways, like having a side hustle on the weekend or getting money from rent.
Teach them about the types of expenses you have, the difference between spending on a ‘want’ versus a ‘need’, and when it’s okay to take on debt – for example, if you are furthering your studies or paying for their education with a loan. The more you can normalise money talk, the savvier they will be on their own money journeys.
5. Let them make mistakes
When it comes to money, nobody’s perfect – not even grown-ups! It’s important that they make the wrong choices and live with the consequences, whether it’s buying a quick thrill toy that breaks within a week or running out of money mid-month. With a bit of tough love, they’ll learn to make smarter choices in future.