Expert shares 8 smart ways to teach your child about saving
Emile Leyane, a financial advisor, shares smart tips for parents to help their children be more savvy with their money.
July is Savings Month.
According to the South African Savings Institute, the four objectives of Savings Month are:
- Promote debate around key aspects of saving.
- Raise awareness of the benefits of short, medium and long term planning.
- Build relationships with key partners to leverage future opportunities.
- Get consumers to move from ennui into action.
Parents have a responsibility to teach their children about money. Giving children financial knowledge is a way of ensuring that they have a good relationship with money from a young age.
Emile Leyane, a financial advisor, shares smart tips for parents to help their children be more savvy with their money below:
READ: Saving for your child's education
Initiate the conversation around money
Children cannot know what they have not been taught. The basis of each child’s behaviour is their upbringing.
The conversation around money needs to be initiated by you, the parent, for the benefit of your child/children. Have these discussions openly and regularly to initiate the importance of saving and investing for the future.
Differentiate needs and wants
Not everything that you or your child wants is a need. In most cases it is want that consumes a lot of our income. Ensure that you have that clear discussion to differentiate between needs and wants. Needs will be essentials, while wants will be some desires.
Examples of needs would include but not limited to shelter, healthcare, food, education, healthcare, and basic clothing. Examples of wants would include going out, latest entertainment devices, junk food.
READ: How To Make Sure You Save Every Month
Implement Goals and Budgeting
Having the conversation needs to be followed up with an implementable goal along with a budget. The goal will be an indication of what you want to achieve. The budget will be the guideline which helps/allocates funds in order to achieve the goal.
Your child needs to understand and buy into the goal in order for them to be able to follow the budget. Without a budget, you will be walking blindly towards a goal. It is very difficult to achieve your goal if you do not follow your plan/budget. Discipline becoming a key element and characteristic that they will pick up from this goals and budgeting journey.
Provide a Platform for Savings and Investments
Once the conversations have been had, the budget has been set, the platform needs to be provided to implement. For your children, a piggy bank is a tried and tested method that brings success especially because the children can visually see/hold the money. A piggy bank is a great starting point for younger children.
Once they get older and understand their numbers a bit more, having investments and savings on different platforms starts to take preference. At this point, their goals and budget will need to align with the platform and vehicle being used to achieve the goal. This could be in the form of a bank investment, a unit trust, tax-free savings account and many more. Consult your qualified financial advisor when it comes to these investment vehicles.
Monitoring
Ensure that they are able to see the growth and decline of their money depending on the investment vehicle being used. The growth can encourage further investment and initiate further conversations and learning into growing their money.
One way to help them keep track of their cash flows is having them write down their spend and the amount after the spend. Use this to compare to what was in the budget to see if they are still on course with the goal or if they have slipped off. Encourage critical thinking about how and where they are spending their money. This will help them avoid unnecessary spending.
Teach them how to handle credit
Credit is a great financial instrument if used properly and understanding how it works needs to be a topic of conversation in some of your money talks with your children. If possible, become your child’s creditor.
Become their bank when they feel the need to purchase an item out of the budget. Charge them interest on the money borrowed for them to learn not only how credit works, however to learn to delay satisfaction at times so that the bigger goal is achieved.
Allow for shortcomings
Part of being a parent is understanding that you won’t always get it right, and neither will they. The odd overspend and unnecessary spend will occur.
However, monitoring and budgeting will allow for your child to right their wrongs and fix their spend because they are made aware of it accordingly.
The best way of learning is doing, and allowing your children to be in charge of their money decisions allows them to do and learn a lot faster than when you are doing it for them.
You are the first example
Children sometimes follow in the footsteps of their parents. Setting the example is the best way of teaching your children how to save. It may not always be possible, however it remain important especially if you are trying to set an example.
Conclusion
Money is an emotional topic for most parents. It arouses insecurities and also brings up shortcomings. To a person/individual, in most cases, we look at it subjectively rather than objectively. At that point, that is where we tend to make our miscalculations and/or mistakes.
I recommend that in your money discussions with yourself and/or with your children, speak to your qualified financial advisor who can help you make your money work for you.
READ: SAfrican consumer savings fall to lowest levels this century: Economist
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