The world has changed significantly in the past 30 years since you were a child. The plastic age of cards and ATM’s became a reality for you as you were growing up. I have no doubt as a young parent today you remember your childhood, carrying money around in a purse, your mom paying bills with cash and playing ‘shop’ with real or ‘play’ money. The children growing up in the 21 st century are not having the same experience. The action your child is experiencing is one where you go to this machine in the wall and it gives you money. When you go into a shop, you buy goods with a piece of plastic in your wallet. Depending on the time of the month, it may be a debit or a credit card. You even pay some bills through your internet banking and your children are none the wiser that this has anything to do with money. Unless we find fun ways to teach our children these skills early on in life, we may reap the consequences of our children not understanding the importance of saving and investing later in life.
Children learn through concrete experiences and using their senses. Teaching the concept of financial literacy to children today needs to be intentional to ensure that there is clear understanding of the concept of money, savings and sharing. Learning to become an entrepreneur early on in life may be the best gift you ever impart to your child. This whole process starts soon after birth. Karina Strydom, an expert on teaching children financial literacy skills states that: “babies are born with an urge to learn.” Start early and enjoy fun and loving activities with your baby or small child, teaching them intentionally about a number of important life skills.
Here is a list of a few of the intentional lessons you may like your child to learn:
- If and when you borrow money, pay it back on time, if not in advance. Good credit is important. A bad credit record can cause many problems for you later in life.
- Learn to dream and set goals for your life.
- Become a citizen not a consumer. Citizens ‘give’ and consumers ‘take.’
- Those who save and invest wisely will face fewer financial woes throughout life.
- Teaching the life skill of delayed gratification will stand your child in good stead.
The three “piggy bank” model
If you can afford it, start giving your child pocket money. The reason we give pocket money is to teach the young child how to manage his own money, how to save, spend, budget and make choices in life. Pocket money is connected to real money and your child will have a much better understanding of how to work with money. One cannot expect a child to be able to make choices and to be able to manage his money at 18 if he never had the opportunity to do it before. Start your children off on this model from around 4 years old.
Find three bottles or containers and mark them as follows:
- For Now
- For Later
- For Others
Decide on an amount that your child will receive each week. Start to help them understand the concept of the three containers by using a story to explain this wonderful journey. Keep it exciting and engaging. You can also add in some activities that they can do around the house that helps them earn some money as well. The split of what they can spend now and what they need to save in the jar for later is agreed up front. At least ten percent of the money every time should go into the jar for others. Explain that this jar will be opened close to Christmas and they can choose who they would like to share this money with. They may want to go and buy a special gift for another child. Try and help the child to make this decision themselves. Take them to the orphanage or place of safety so that they can feel what it feels like to give. The ‘for later’ jar may be for a special ‘big ticket” item that they want. Having to wait and save for this is a concrete exercise in delayed gratification. Teaching delayed gratification will ensure that as an adult there will be understanding of why it is important to invest in risk cover. The life lesson would have been learnt and understood early on and that makes it much easier as an adult to keep the cover we take out and not allow our policies to lapse.
Here are some other activities to do with your child.
- Allow the child to sort the different coins
- Stack the coins from big to small.
- Draw the coins on paper
- Do counting with coins.
- Compile a shopping list with your child
- Let them play shop at home
- Teach them some business skills by running an imaginary business
Working together as a family on financial literacy can be a whole lot of fun and teaches many great lessons in the process. Here is an exercise to do around budgeting. Our children need to understand the living costs that we incur on a monthly basis. They need to understand that their actions daily can impact the bills. Discuss your income and expenditure with your school going children. They need to understand that you go to work each day to earn money and that each day there are expenses that need to be paid. Go to an ATM and draw out your entire salary for the month. Sit around the table with the children and put all the money in a pile. Take out all your monthly bills and start the process of showing them where the money goes. With each bill count out the money and put it one side.
- What do you need for the bond/ rent
- Payment for the car.
- School fees
- House insurance
- Life insurance
- Eating out
- Pocket money
There may be many other expenses and hopefully there is still money left on the table after all the bills are paid. If not this will be the first time the children will understand that there is more ‘month’ than ‘money’. This also helps to then have a conversation on where they believe you can cut back as a family? How else will they ever learn unless you have these conversations?
The journey of parenting is a marathon and there are many lessons for us to teach along the journey. Each day we can share a small quick learning to ensure that this does not become a burden in our very busy world. Stephen Covey shares one of his habits from his book “The 7 Habits of Highly Effective People,” – Begin with the end in mind. This means that if we know what we want our children to be like as adults, there needs to be learning and fun along the way to ensure that this process happens. There can be no greater gift for your child than understanding how important it will be to be able to save, invest and stay out of debt when they one day enter the big world of adulthood.