Teach children about the value of money from an early age and empower them to make sound financial decisions throughout their lives, this according to Lisa Illingworth, co-founder and CEO of FutureProof SA. “We take so many of our habits, both good and bad, from our parents. The responsibility for instilling a sound financial grounding is therefore one of the primary objectives for all parents today because as it stands, this is not a skill taught at school let alone built into a habit”.
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Richard Andrews, CEO of Diversiti Management Consulting, says that when thinking about one’s own spending habits, consider how our own parents might have influenced us. “Did they give you a thorough education on how to handle your money? If not, how will you make a difference for your children?” asks Andrews.
In the words of Robert Kiyosaki, as parents we should be giving our children power before we give them money. Power to design their own future based on sound financial habits.
“With this in mind here are a few tips on how parents can start to teach their children about managing and saving money” says Lisa.
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1. Importance of saving
“Encourage your children to plan ahead and save money to achieve their desired goals. Putting money away for them and allowing them to watch their money grow will teach them to be more patient and disciplined with their money”. Instant gratification is rife in the world of today and people are saving less than they ever did due to the decreasing amount of disposable income generated by salaries. “Highlighting saving at a young age with children develops both a personal and professional habit valuable as an employee and entrepreneur alike” she elaborates.
2. Bank account
A kids’ banking account is a great tool that children can use for monitoring, managing and saving their money. Having their own bank account will teach them the responsibility of managing their own finances. Enabling children to see their money via digital platforms is a fun and interactive way to educate children about managing their money, while also being safe and convenient for both parent and child. It also instils a critical skill in the fourth industrial revolution which is a sense of self-agency. The ability to control and decide about how money is spent and saved generates responsibility, ownership and reduces entitlement.
3. Budgeting and spending
“Help them to draw up a budget each month and let them take control of their spending. For example, allow them to allocate a budget for necessities, such as school stationery, savings and pocket money. Whenever possible, go shopping with them and guide them when necessary” says Lisa. It is never too early to teach your children the principle of “paying themselves first”, by first allocating any pocket money to their budgeted savings before spending, and not saving only if there is anything left over after their monthly spending. Once this skill is mastered in their personal capacity, it can be easily transferred into a business context and cash flow is more easily managed when kids become entrepreneurs.
4. Reward discretionary effort
When living at home and being a part of the workings of the household, children need to play their part of that team. Rewarding simple and expected chores like making their beds or doing the dishes is not an extra effort but their role in the team. “The traditional pocket money system can be used to reward additional effort made on tasks that require children to take the initiative to do them. This can be watering plants, feeding animals or making parents a cup of coffee in the mornings. They are tasks not essential in helping the household run smoothly”.
Lisa concludes saying that teaching our children good financial discipline isn’t about them necessarily becoming rich. “Someone who is a millionaire could be in dire straits, while someone else who earns a more modest salary could be doing great. It’s all about planning and being aware of your spending and instilling the fundamental behaviours that form the foundation of good financial management”.