Mothers and daughters and money

*This article is brought to you by Brenthurst Wealth

By Leslie Greyling *

Children’s money habits are formed between the ages of 6-12. Remember little eyes are always watching you, so your attitude towards money and personal finances will shape them. You may engage in habits like overspending and impulse buying which sets a bad example.

When you are shopping and always paying with plastic, your children will have the perception that there is an endless supply of money with the swipe of a card. It is important to explain to them that you must earn money and save to be able to buy items you as a family need daily.

If you and your spouse are often arguing about money, they will notice this and develop a negative mindset towards finances.

Set a healthy example for your children and be a positive role model when it comes to finances, and they will be much more likely to follow it when they get older.

In practice teaching kids about money management comprises of countless small practical lessons and conversations spread over many years.

Here are a few age-appropriate ways to teach your children about finances:

• Young kids (4-6year old): Use a clear jar/piggy bank for their savings. This gives them a visual – they can see their money “growing” as they add small change or birthday money to the jar.

Turn shopping into a learning experience, show them for example how to save for a new toy.

• 6-8 year olds:

– Show them things cost money.  They must experience how money and spending works. Take them to buy something, give them cash and let them look around for an item they can afford with the money they have. Let them physically hand over the money to the cashier and get change.

• Explain to them that we must pay for things they might take for granted, such as rent/bond repayments and electricity.

• 9-10 year olds: 

• Discuss wants and needs, explain the difference, you can even quiz them on items to illustrate the concept. Point out things in the house like food, clothes, art works, and ask them whether the object is a want or a need.
• Start giving them an allowance based on chores they do around the house. This way they will also learn the value of hard work to earn extra cash.
• Help them understand how far money can stretch by comparing the cost of one item they want to another.
• Activities such as going to a restaurant, or a family holiday have a cost and everyone can’t necessarily afford this.

• 10-12 year olds: 

• At this age children want independence, so focus on getting them to take responsibility for their own spending and saving choices.
• Set and define savings goals. Help them figure out how long it will take to save for a new game or tablet they want. Break it down into manageable bites, based on their savings rate.
• Open a bank account for them and have them track their spending and savings.
• By this time, they will have noticed that some people have more than you do, like a bigger house or pool, and there are also people who have less. They will start comparing themselves to their friends, and things they might have or not. Discuss this with them and focus on the concept of contentment with what you have in your life.
• Stress the importance of giving, once they start getting an allowance, they can pick a charity or church or someone they know who needs a little help. Eventually they will see that giving to others is important and feels good.

• Young teenagers: 

• At this stage your child should have a strong understanding of money basics. Now is the time to teach them more responsibility and how to use their money with the future in mind.
• Help them to start with a simple budget. Discuss their allowance, and how much of this to spend and save. For example 2/3 to spend (wants and needs ) and 1/3 to be saved.
• Offer savings incentives, you can match their savings if they reach a certain amount.
• Set financial goals and how to track the progress to achieve these.
• You can talk to them about weighing up decisions and understand possible outcomes. For example, if you buy the new pair of shoes, you won’t have money to go to the movies.

• Older teens:

• If their monthly social life money disappears too quickly, discuss breaking it down into 4 weekly amounts and ways to make it last a week.
• You can act as their creditor. One of the basics of saving is not to live beyond your means.

If your teenager wants to purchase something, you could “lend” them the money and require repayment

from their allowance, with interest. The lesson you want to teach is that saving may mean delaying

gratification longer, but the item you want to buy will end up costing less if you wait.

• They must understand how to use credit responsibly.
• Explain to them the danger of credit cards and introduce them to compound growth.
• Once they can understand that there are things he/she can do with money to make it grow, you can talk to them about investments, and concepts such as comparing risk and reward.

Part of putting children in control of their own money is letting them learn from their errors. It’s tempting to step in and steer them away from a potential costly mistake, but it might be better to use that mistake as a teachable moment. That way they’ll know in future what NOT to do.

All of the above will equip them to be way ahead by the time they go to university/college or start working.

It’s never too late to start teaching your children money skills. Over time they will become more confident to start making good financial choices independently and become financially responsible adults.

This is especially important for girls as despite many societal changes, like women building their own careers and wealth, the majority are still not as financially independent as men.  Help to set your daughters up for future success.

* Leslie Greyling is a financial advisor at Brenthurst Wealth Fourways.