Research shows that many children’s money habits like self-monitoring, are developed as early as seven years old By teaching your children about financial literacy from a young age, you give them a head start and a better chance of having a healthy relationship with money later on in life which can also benefit their psychological health. We chat to Head of Client Solutions Savings at Sanlam, Kenosi Magosha on some age-appropriate money lessons you can teach your children that they can practice throughout their lives.
Age 3-6: Lay The Foundation
Teach your child aged three to six how to manage their impulsivity through the robot system – a simple “stop to think before you do” concept. Giving in to all your children’s demands gives the impression that resources are limitless which can later result in them overspending and having trouble managing debt. Instead, practice delayed gratification. It is also the perfect time to kick start saving habits and show them the benefit of compound interest as they grow. Educational TV programmes such as Takalani Sesame are also a great way to instil the basics of financial literacy in young children in a relatable and exciting way. Takalani Sesame educates millions of children between the ages of 4 and 8 about literacy, numeracy, and basic life skills.
Age 6-10: The three S’s of Saving, Spending, and Sharing
Between the ages of six and 10, is the perfect time to teach your children the value of money and the concept of earning it. As the saying goes “money doesn’t grow on trees.” To teach your children the concept of earning, help them think of ways to solve other people’s problems, for example, washing cars or cleaning neighbours’ gardens to earn some pocket money. At this age, children also need to learn to deal with comparisons as they start school and realise what other kids have. Introduce and reinforce the three S’s of Saving, Spending and Sharing for any allowances, gifts and money earned.
A practical example: Divide the money towards:
- Contributing to spending on games or books
- Sharing through gifts for friends and family,
- A savings jar, using a real jar and virtual one e.g. bank account to help them learn to deal with tangible and virtual money.
This will teach them how to manage their money, responsible spending, and saving to benefit from compound interest as they grow.
Age 11-13: Good And Bad Consequences
As your child nears the teenage phase, they begin to develop a stronger sense of independence, reasoning, and appreciation for the long-term consequences of their decisions. Teaching them about good and bad consequences when it comes to managing money is an important lesson they need to learn as they begin to desire more independence. Encourage commitment to short-term and long-term goals by allowing your child to develop their own goals and then helping them put together a savings plan with regular check-ins to see how they are progressing. This way they will think twice before spending and will think of other creative ways to achieve their goals. Concepts of investing can also be introduced to broaden their savings horizon. Teach them the basics of investing by making it practical and using examples of the companies you shop at or new developments you see in your community that require investment. This will teach them about not putting money aside just to spend it and will help them learn to talk confidently about money.
Age 13-15: Test Drive Their Finances
At this age, you need to learn to let go and give your child room to test drive their finances in a safe space! Reinforce the financial habits and concepts of earning, saving and investment, sharing, and spending. Give control of that bank account and access to an online profile. Keep encouraging your teenager to talk about finances and to read about money-related matters. While they are not old enough to work in the real world, they can volunteer to learn the skills that can help them to earn money in the real world. Encourage them once again to come up with ideas on how to earn more money – babysitting, walking dogs, or selling home-made goods. It’s also important to teach your teenager about debt as they begin to earn an income. If they run out of pocket money, you could agree to help them but with a clear repayment agreement so that they understand that borrowing means you are taking money from tomorrow.
Age 15-18: Financial Literacy
By now, your almost-adult should have a solid foundation for financial literacy. However, if you have not started yet, it’s not too late to start by leveraging the lessons shared above. As the high schooling years are nearing a close, it is important to land the concept that some things cost a lot of money which may require the use of debt. A good way to avoid or limit the use of debt is to plan ahead and to know what good and bad debt are. Teach them about bad debt and why it’s better to save than to take out a credit card or loan for unforeseen circumstances. By engaging in financial literacy and instilling good financial habits, you are giving your children the ability to thrive financially and weather the difficult financial times they may encounter. “It is time that we prepare our future generations for what lies ahead to ensure a more financially stable South Africa and prosperous communities,” says Kenosi.