Raising financially responsible children

LEARNING to save and to master the art of delayed gratification are keys to wealth building; and the sooner you learn, the better you will be at it.

Here are some tips for raising financially responsible children:

Let them earn their own money

Whether it is in the form of a regular allowance or pocket money, reward your child for chores done around the house. Learning to appreciate the link between effort and reward is important because there is no “free lunch” in the real world.

Give them savings jars

Or better still, get your child to make her own savings jars by recycling glass bottles or plastic containers and labelling them Save, Spend and Give. Discuss and agree on what proportion of their allowance will be spent on each. These three aspects form the foundation of responsible money management.

Have healthy money conversations

The way you speak about money will impact your child’s future relationship with money, so be sure to phrase every conversation positively. “Money doesn’t grow on trees” is patronising and does little to explain where money does come from. Speak positively about money as a tool that can be used for good.

Teach them where money comes from

Explain to them where the family’s money comes from and how you earn it. Help them understand that you are able to use your special skill to make money, and this money is used to provide for the family.

Take them grocery shopping

Take your child grocery shopping so that they can see you in the act of comparing prices, making decisions and handing over your cash. Talk to them openly about how much things cost and why you have decided not to buy certain things.

Create a timeline

If you are saving for a particular goal, for instance, a new couch, draw a timeline with your child so that they can visualise the distance between now and when you buy the couch. This will help their mind make the connection between time and money.

Read to your child

Find children’s stories about money and keep them interesting. Avoid too many “rags to riches” stories which reinforce the idea that anyone can “win it big”. Seek out well-written children’s stories with meaningful lessons about money, hard work, saving, being smart and giving to others who are less fortunate.

Let them play with fake money

Get some fake money — both notes and coins — and let them play with it.

Together with their friends, let them set up a “shop”, trade, barter, negotiate and count their takings.

Take them to the bank

Expose your child to the concept of a bank as soon as they are able to understand it so they can appreciate the importance of keeping their money in a safe place.

Open a bank account

Once your child is old enough, set up a bank account for them, which ideally has online access.

Log on regularly so that they can learn to appreciate that online money is still real money.

Discuss wants versus needs

One conversation explaining the difference between “wants” and “needs” will not work.

Talk regularly about the difference between “wants” and “needs”, and filter all purchasing decisions through the test. In time, your child will learn to automatically filter all buying decisions in this manner.

Get them to write down their goals

Get your child to write down a list of goals or things they are saving up for. Wait a few weeks and then revisit those goals with them. It is likely they will find that their goals have changed in that time. This will help teach the danger of impulse buying.

Give them choices

Having said that, it is important to allow them to make purchasing mistakes and to live with the consequence of their choice. Begin by giving them limited options. For instance, allow your child to choose between three different treats and to live with the consequence of whichever one they choose.

Let them think of ways to earn money

Encourage your child to think of other chores that need doing around the house and let them negotiate a price with you. This will encourage them to think creatively about ways to generate income, while at the same time honing their negotiation skills.

Be their creditor

If your child has grasped the concept of interest, allow them to borrow money from you to make a large purchase. Insist that they pay you back over an agreed period of time, and include a penalty if they make a late payment.

Teach them to track spending

Give them a blank notebook and encourage them to write down everything they spent in a month to get them into the good habit of tracking expenditure and keeping records.

Use teachable moments

Use every opportunity to create teaching moments for your child.

 Encourage entrepreneurial thinking

Use any opportunity to discuss clever and innovative ways to make money. Show them real examples of people who have come up with smart concepts, discuss how a shop could improve their service or product, or get them to come up with ideas of their own.

Don’t let them believe that the only way to earn money is with a university degree: Having a university degree provides no guarantee that you will be wealthy or successful. Some of the world’s wealthiest people dropped out of university to start their own businesses.

Learning should be a lifelong pursuit and should not be confined to three years at university.

Involve them in family decisions

Life is about choices, so let your child be part of the decision-making. When it comes to buying a new family car, include your child in the decision-making process. This will help them understand that everything you purchase today affects what you can afford tomorrow.

Set up an online trading account

Once old enough, set up an online trading account and let your child practise with a dummy account at first. Allow them to buy and sell shares so that they can start learning what emotions drive their decisions.

Applying for scholarships and bursaries

Whether or not you are able to afford their tertiary education, encourage your child to apply for their own bursaries and scholarships.

There is value in learning how to market themselves and how hard work can be rewarded.

Teach them how to give

Philanthropy starts when we teach our children to share with others, and we should reinforce this concept throughout their childhood. Let them decide how they want to use the money in their “Give” jar and then hold them to account. — Moneyweb