How to raise financially responsible children
How to raise financially responsible children I know, for some this may seem an article too far, but for others, it could be right up their alley. Irrespective of whether you are a parent yet or not, gearing yourself up for the inevitable (if it is a choice of yours) to raise financially responsible children one day is becoming increasingly important, especially in this day and age. When is it kosher to start discussing managing their allowance more wisely, to save up for that big-ticket to go to that concert they’ve been begging to go to or even to buy that Playstation game on their wish list?
At what age should you start teaching your children about their credit scores and the effects that late payments have on their record for a substantial period of time? The correct answer to both of these questions is simply: Set the president young by creating financial responsibility from a young age.
Although I have not been granted the privilege to gain experience in raising children of any sort (dog mother for the time being), I do have two nieces who I call my very own. One of them being 5 moving on 25 years old, she challenges me in ways I never thought were possible without being a mother yet. She has gotten to the age now where family and friends gift her money regularly, her favourite being “paper money”. As soon as she receives it, she asks to go to the shop to buy all her heart’s desires, from sour sweets to flavoured sprays, that R10 is her gold. One day, she asked me to take her to the shop. I agreed and off we went to the nearby store, R10 gripped intensely tight in her right hand, as if she thought the wind would blow it away. She requested sweets and ice cream, her eyes lit up as the shop attendant brought her everything she wanted. He then gently muttered, “R9,50 please”, she gave him the R10 and got her 50cents back in change. Eyebrows in a squinted state, she looked extremely upset as we were walking home. I asked her what was wrong, but no answer. We got home and she marched straight to her mother and complained about having to pay for the items she wanted! It was at this moment that I explained the simple transaction process between the buyer and seller, obviously, she did not want to hear anything. She stated she has no more money and therefore can’t buy anything the next day, grabbing the opportunity to educate her, even at the age of 5 years old, I informed her that if she saved some money and had she sacrificed the ice cream, that she would’ve been able to buy it the next day.
I may not be an expert in the field of equipping kids to be financially responsible, however, speaking from my own experience, these are the tips I want to share:
● Start young The younger the better, instill responsibility at a young age. Kids soak in information from birth to 5 years old more so than at any other time of their young life.
● Have open discussions with your children regarding finances No, I am not suggesting discussing all of the financial stress that comes along with being an adult or parent with your kids. I’m talking about the importance of preparing a budget, paying bills before spending money on luxury goods, and the vital principle of SAVING some funds for later, for a rainy day, or for a specific cause.
● Value of money
This is an important one. Your child will not get very far in the quest to become financially responsible if they do not understand the value of money.
● Apart from bills, pay yourself first The “paying yourself first” technique is something that people do not practice enough. After mandatory spending (bills, debit orders, etc.), if you pay yourself first = saving money before spending it on anything else – teaches the best kind of responsibility. I know kids do not have any sort of debt or “mandatory spending” but the principle can still be taught – on a smaller scale obviously.
● Get them into the habit of paying for things themselves Now I’m not saying make them pay for every single part of an outing, begin small like paying for the toy they really want or for the make-up set they always longed to have. This breeds independence, a great trait.
● Appreciation Talk about learning to appreciate what you have. I remember visiting a children’s home a few years back, the kids similar to my age – but everything else was so different. Yet they appreciated everything they had, and not what they did not. Your want is their luxury, remember that.
● Practice makes perfect
Applying this through teaching is important, but your children can only truly become responsible in financial situations if they are put in situations like this, to begin with. Allow them to be able to spend a reasonable amount of money by themselves with guidance, of course.
In one of my previous blogs, I briefly shared a story about the tactics my father used to teach me regarding financial responsibility. I was just a kid with a few hundred Rands but was given the license to make my own decisions with my money, knowing they were mine and nobody else’s. I had to prioritize and had to learn the true value of what each cent meant.
Warren Buffett puts much of his success down to having good habits. It’s the same, he says, with saving and investing, and the earlier you develop them the better. “The biggest mistake is not learning the habit of saving properly, do not save what is left after spending; instead spend what is left after saving.”
Until next time
– Jamie Julies (CFO)