Teach your kids to be money savvy

Teach your kids to be money savvy

Children learn the ropes quickly which can be hugely beneficial, especially if you harness this ability to grasp new concepts and focus it on something that will benefit them for life. So, what is this life-long benefit we’re talking about? The value of money. From an early age, you can help your children learn and understand the concept of earning, spending, sharing, borrowing and saving money. Of course, this doesn’t happen all in one go, but there are “age-appropriate” money lessons that you can apply starting from around the age of 5. Let’s take a look at some of them.

Ages 5 – 8

This is generally around the time that parents start giving their children pocket money, whether it’s given routinely or earned from helping out with small tasks around the house. With that, comes the first “lesson”, learning what to do with their money. Help them understand that they can spend it on little things, or they can save up their pocket money and spend it on something bigger. By encouraging your child to save (even if it’s only a small portion of it each week/month), you’re also teaching them about setting goals, and the satisfaction that comes with it. Think about the times you’ve seen a child in a toy shop go up to the counter with their pocket full of money, and pay for something that they’ve saved up for themselves. There’s no doubting that kind of pride, or achievement.

Ages 9 – 12

This is a good age to start involving your children in decision making processes when you’re out shopping, and teaching them about comparative pricing. Ask them to compare prices between generic and branded products, for instance. If there really is very little difference between the products, explain why it’s perfectly acceptable (and a great way to save money) to stick with generic products. Good examples to compare at this stage are things like toilet paper, household cleaning products, and even school stationary such as books, pens etc.

Ages 13 – 16

At this stage, you can start shifting your money lessons from the difference between short term money saving goals and long-term goals. Enter the concept of “compound interest”, one thing I wish I had learned about earlier in life. Compound interest is interest earned from the interest on your savings, as well as the past interest from your savings. In a nutshell, you earn interest on interest, and it’s money for jam. Give your child simple examples to help them understand how it works, and ask if they would like to start a savings account that will allow them to watch their money grow. Motivate them with “big money” goals. They could potentially save up to buy a car when they turn 18, travel when they finish school, or help pay for college or university if they want to go.

An example of compound interest earnings, which is relatively easy to understand at this age is:

You invest R 30 000 in a bank account that gives you 6% interest each year. At the end of 4 years (assuming you haven’t withdrawn any money), you’ll have around R 37 800 (depending on the institution and fees incurred).

In closing, remember these should be taken as guidelines only. Children often develop very differently from each other, and at different speeds. So, if your child doesn’t seem particularly interested in money, or can’t grasp a certain concept, don’t force it on them. Give them time, and try again at a later stage.

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