Are your children equipped to manage their own money effectively? Alfred Ramosedi, African Bank Group Executive: Sales and Marketing, says this is one of the many challenges parents face but also the most incredible gift you can give your children.
“The problem we are facing is that when children grow up in privileged environments, they don’t know how to manage money. They’ve never learnt to save towards a goal or even been taught the basics of investing, despite growing up in households where saving and investing for the future were possible,” he says.
Ramosedi says that, without doubt, children whose parents encourage them to manage money grow up to be responsible and financially independent adults. “What parents need to understand that it’s never too late to start teaching your children about money. If you haven’t done so yet, start today,” he says.
So, as a parent where do you start? Ramosedi offers the following advice:
Piggy banks and saying no
Teach your very young children about saving money through a piggy bank concept and the value of money by not buying them everything they see. “Young children respond very well to the concept of saving if they have a realistic goal to work towards. It’s also interesting to see how quickly children learn that ‘money doesn’t grow on trees’ when they are told they have to wait for an item and don’t have it purchased immediately. There is nothing wrong with telling your children they can’t have an item because you don’t have enough money but will save towards it.
Set up a meeting with a financial advisor when your child gets their first job. Encourage them to put a percentage (say 10%) of their earnings into savings or possible investments each month. It is a good principle to learn from when you are young. People who have adopted this principle have learnt to manage their money, while those who haven’t, never seem to have enough money. You might even want to consider matching their percentage of savings each month as a reward for their diligence.
A big problem in society currently is that parents are expected to support their children financially for longer. This places enormous pressure on parents. “There seems to be a culture of delaying working life amongst millennials. Tertiary education, for example, is often seen as a way for young people to avoid entering the work space. Money spent on education is only an investment if your child takes their studies seriously, it should not be used as a way to delay working life. By insisting your child takes out a student loan to study they may strongly rethink whether studying is for them at all. The longer we support our children financially, the more we erode their self-confidence and independence. Don’t be afraid to set boundaries and enforce these when it comes to money and how it is spent in your home.
Celebrate hard work
Teach your children to be proud of the work they do – whether it’s doing chores for pocket money or starting a small business. Having a job and a purpose is something to be proud of. Children should learn to value work from a young age because earning an income and using it wisely are interconnected.
“Children learn through the values they experience at home, not through what they’re told to value. If you want to give your child the gift of knowing how to manage money, be a good example. Decide what your value system is and don’t be afraid to discuss finances with your children,” concludes Ramosedi.