Teach Your Kids to Save

No matter how old you are, it pays to be financially savvy. Children are curious about money and through observation and repetition, can be taught about it as soon as they can count. Educating, motivating and empowering children to become regular savers and investors will ultimately encourage them towards financial independence and smart financial decisions later on in life. To help you educate your kids about personal finance and how to manage money, here are some tips:

Money Matters

Talk to your kids about your values concerning money. How to save it, how to grow it, how to spend it wisely and how to avoid the temptations of credit cards or excessive, thoughtless spending.

Help children learn the differences between needs, wants and wishes. This will hopefully prepare them for making good spending decisions later in life. You can help them by differentiating between things that they need (new shoes for example), that they want (a new music CD) and things they wish for and would need to save for (a new bicycle or cellphone).

Teach them about setting goals. Whether it’s saving to go to the movies once a week or saving up for an iPod, goals will help children learn about the value of money and how to become responsible for it themselves.

Introduce kids to the value of saving versus spending. To demonstrate the concept of earning interest on income, you could consider paying “interest” on the money your kids save at home. 

Pocket Money and Spending Decisions

Receiving an allowance gives kids a sense of independence and spending power. However, simply handing over the cash each week is not going to teach them about the value of money.

Give pocket money in denominations that encourage saving. If they receive R20 a week, give them four R5 coins and encourage them to set aside at least R5 towards their savings.  

Take children to a bank to open their own savings account. Encouraging regular saving habits early is one of the keys to saving success. Anyone with a minimum deposit of R10 can open a Capitec Bank Global One account – just remember you’ll need to accompany them if they’re under 18 years old.

Allow them to make spending decisions. Refusing to let your children withdraw and spend their own money could discourage them from saving. Rather encourage them to do research before making major purchases and wait for the right time to buy (like the end of season sales). Have a discussion about the pros and cons of saving or spending their hard-earned money before leaving for the shops.

Keep records of money saved, invested or spent. To encourage an element of financial control use 12 small envelopes – one for each month of the year – and encourage children to place receipts for all purchases in the envelopes. This could be useful when explaining the concept of budgeting as they will be able to see regular and ad hoc expenses throughout the year.  

Teach children the value of money when shopping. Going to the supermarket is often a child's first spending experience and the outing can be used to demonstrate planning and budgeting. By writing a list of the week’s shopping you can teach them to avoid impulse buying and by making price comparisons you show them how to check for value and quality.

First-time investors. To help demonstrate the workings of the stock market you could allocate a few of the shares you own to your child and follow the company’s market activity together. This exercise would work best with brands that kids can relate to such as Spur, Pick ‘n Pay or MTN. As they get older, you could help your kids choose some shares to buy with their own money.

The Ins and Outs of Moolah

Explain the dangers of borrowing and paying interest. Charging interest on small loans you make to your children will help to illustrate the concept of interest.

Demonstrate being aware of spending. When using your debit or credit card at the supermarket or a restaurant, show them how to verify the charges and how to calculate a tip.

Encourage regular family financial discussions. Whether this is a time for younger kids to tally up their savings or for a discussion with your teenager about developments in the national and global economies, improving their understanding of finance will be useful in becoming more confident with money and ultimately, establishing their financial independence.