Kids & Money – Be a Savvy Money Mentor

Were your parents or caregivers wealthy or did they struggle with money? Were they extravagant spenders with a heavy debt burden? Or were they frugal and financially responsible? What did they teach you about money through the example they set?

These are important questions, because research shows that our financial behaviour reflects to a large extent that of our parents. And our financial behaviours, similarly, will greatly affect how our children behave when they are responsible for their own financial affairs.

Given that financial literacy is not taught at school or in other settings, what children learn about money and how to handle it, is learnt at home. Your kids are watching how you and your partner handle money-related issues – whether you make big-ticket purchases on impulse or debate, discuss and comparison shop before you buy; whether you spend more than you earn or save and invest diligently; and whether money is a source of constant fear and stress, or an issue that is handled with confidence and sound decision-making.

This makes it crucial for parents to be savvy money mentors, setting an example for their kids and including them in the family’s financial matters.

Here are some ideas to help you be a more savvy money mentor for your kids as they learn about money and how to handle it.

1. Speak to your kids about money matters

Children are often left out of financial conversations, especially if finances are tight. Regular constructive money conversations with your kids will ensure they feel more secure now and give them a better chance at a financially healthy life. Help them – age-appropriately – to understand where money comes from, how it is earned, what it is worth and how to spend, save and invest it wisely. Keep learning about financial concepts or new solutions and share your knowledge with your family.

2. Do it together

Include your kids in your financial goal-setting and planning; show them your household budget and how you stick to it; and let them help you track your savings and investment performance. Studies show that kids who are included in the day-to-day management of household finances display healthier financial decision-making and understanding when they’re older.

3. Let them experience financial decision-making

As soon as kids understand the basics of maths, parents can give them appropriate opportunities to make their own money choices, to experience the consequences, and to learn from their decisions. For example, allow them to decide on their own how to spend their birthday money or give them a choice between two purchases or gifts that cost the same to help them understand how to get the most value from every rand.

4. Encourage kids to save

Piggy banks, money boxes or even savings charts are time-honoured ways of helping kids experience the satisfaction of watching their savings accumulate. For older children, a savings account not only offers a safe place to keep their savings, but also an opportunity to begin understanding the basics of financial literacy, including interest, deposits, withdrawals and statements. Positive reinforcement is also crucial – be sure to praise and take pride in your child’s efforts to save. You could even encourage their saving efforts further by matching your child’s contributions rand for rand.

If there is room for improvement in the example you are setting for your kids, remember that your financial coach is always ready to help! Simply click here for assistance to become a more savvy money mentor for your children, so they will learn sound financial behaviours that will benefit them throughout their lives.