Pay | Teach | Inspire : A Money Lesson for Children

Posted in Blog
01/04/2019 Mduduzi Luthuli

Saving money is one of the most important aspects of building wealth and having a secure financial foundation.  Yet many of us have learned the importance of saving money through trial and error, and more importantly, experience.

In school, we aren’t really taught about the importance of saving and many of us find that as adults, we must fend for ourselves. As adults, we know the younger you are when you begin retirement investing the more money you’ll have when it’s time to retire. However, most of us start investing too late to take full advantage of the time we have.

But what about your children? How different could your children’s future be if they understood how to build wealth before they even finish high school? You can teach them by starting with simple concepts and building on them over time. So how do you do it?

Pay Them

Give them an allowance and make them learn to use it wisely. Teach them to pay for things which, up until now, you have been paying for. Well, you still are, of course, but they’re making the decisions now.

Clothing is one of the most common forms of allowance. You assess how much you spend on clothing your children and give them the money to spend on clothes as they wish. This is a great way to teach your children to look after their own money and can be used, as they get older, for all sorts of other things than clothes– music, cellphone, going out, movies– in fact most things that they want and you’re paying for at present.

You and your child need to be absolutely clear what the allowance covers. Are they supposed to pay for their own school uniform, sports gear, ballet outfit, and so on, or just leisure clothes? If you want to make any restrictions, agree on them clearly in advance with your child; for example, the clothing allowance can’t be spent on low-cut tops, or the going out allowance can’t be used for alcohol. Think these through carefully before you set up the system, or you’ll rightly have an argument on your hands if you try to impose new conditions later.

Teach Them

One way to keep money lessons ongoing is to create a timeline so that your child can visualise when they will reach their goal.

Let’s say you give them R100 a week and they want to save up R1, 000.  If they saved one hundred percent of their allowance, they’d reach their goal in ten weeks, or roughly three months. Start by getting a long piece of paper and a marker.  Have R0 on one side and R1, 000 (or whatever goal amount) on the other side.  Create checkpoints on the paper for when they reach 25%, 50% and 75% of their goal.

Every time an amount is saved, draw a line illustrating how much was saved.  Let your kids know that they will get small rewards at each checkpoint. Small rewards such as extra cash or not having to do chores can encourage children to keep going.  Visuals are also helpful in illustrating their savings goals and how their money is growing.

This also has the added benefit or teaching your children about delayed gratification. A discipline which is deeply lacking in our society. Our consumer culture trains our children to want – or in their minds, need – the newest phone, the coolest toy, the most expensive clothes, at the expense of any long-term planning. They want it right now. They don’t want to hear about saving patiently towards a goal but they must. Children don’t want to hear about delayed gratification, but they must. If not, we can’t wonder why they grow up into adults who lack the discipline and patience to save accordingly for life goals.

Inspire them

Learning doesn’t have to be painful and money lessons don’t have to be scary. Teaching smart money management isn’t about a single conversation had at the kitchen table. Instead, it’s all the small comments you make and questions you answer throughout the days, weeks and years. Even if you don’t think you’re teaching, your kids are always watching and learning.

It may sometimes be challenging but your role is that of mentor rather than a stern parent. Asking questions about their choices and challenging their thinking will help them see options they wouldn’t otherwise.

Celebrating their successes (and encouraging them after failures) sets them up for a lifetime of being both resilient and money savvy. The discipline and responsibility learned at a young age can translate into a life that is equal parts success and happiness. Isn’t that what we all want for our children?

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