Advice for raising financially responsible children

Learning to save and to master the art of delayed gratification are keys to wealth building; and the sooner you learn, the better you will be at it. Here are some tips to raising financially responsible children:

  1. Let them earn their own money: Whether it is in the form of a regular allowance or pocket money, reward your child for chores done around the house. Learning to appreciate the link between effort and reward is important because there is no ‘free lunch’ in the real world.
  1. Give them savings jars: Or better still, get your child to make her own savings jars by recycling glass bottles or plastic containers and labelling them Save, Spend and Give. Discuss and agree what proportion of her allowance will be spent on each. These three aspects form the foundation of responsible money management.
  1. Use an Advent Calendar: A practical way to teach the art of delayed gratification is to use an Advent Calendar or something similar. It is also an excellent way to help your child understand the connection between time and reward.
  1. Have healthy money conversations: They way you speak about money will impact your child’s future relationship with money, so be sure to phrase every conversation positively. ‘Money doesn’t grow on trees’ is patronising and does little to explain where money does come from. Speak positively about money as a tool that can be used for good. 
  1. Teach them where money comes from: Explain to them where the family’s money comes from and how you earn it. Help them understand that you are able to use your special skill to make money, and this money is used to provide for the family.
  1. Take them grocery shopping: Take your child grocery shopping so that she can see you in the act of comparing prices, making decisions and handing over your cash. Talk to her openly about how much things cost and why you have decided not to buy certain things.
  1. Create a timeline: If you are saving for a particular goal, for instance a new couch, draw a timeline with your child so that he can visualise the distance between now and when you buy the couch. This will help his mind make the connection between time and money.
  1. Read to your child: Find children’s stories about money and keep it interesting. Avoid too many ‘rags to riches’ stories which reinforce the idea that anyone can ‘win it big’. Seek out well-written children’s stories with meaningful lessons about money, hard work, saving, being smart and giving to others who are less fortunate.
  1. Let them play with fake money: Get some fake money – both notes and coins – and let them play with it. Together with their friends, let them set up ‘shop’, trade, barter, negotiate and count their takings.
  1. Take them to the bank: Expose your child to the concept of a bank as soon as they are able to understand it so they can appreciate the importance of keeping your money in a safe place.
  1. Open a bank account: Once your child is old enough, set up a bank account for him which ideally has online access. Log on regularly so that he can learn to appreciate that online money is still real money.
  1. Discuss wants versus needs: One conversation explaining the difference between ‘wants’ and ‘needs’ will not work. Talk regularly about the difference between ‘wants’ and ‘needs’, and filter all purchasing decisions through the test. In time, your child will learn to automatically filter all buying decisions in this manner.
  1. Get them to write down their goals: Get your child to write down a list of goals or things she is saving up for. Wait a few weeks and then revisit those goals with her. It is likely she will find that her goals have changed in that time. This will help teach the danger of impulse buying.
  1. Give them choices: Having said that, it is important to allow them to make purchasing mistakes and to live with the consequence of their choice. Begin by giving them limited options. For instance, allow your child to choose between three different treats and to live with the consequence of whichever one he chooses.
  1. Use practical ways to teach them about interest: A great way to teach a child about interest is to use a day planner and a packet of Jelly Tots. Place a Jelly Tot on the 1st day of the month and tell her that if it is still there tomorrow, she gets 2 Jelly Tots, and so on. The maths is wrong, but the concept is right – that money can accumulate over time if you just leave it.
  1. Let them think of ways to earn money: Encourage your child to think of other chores that need doing around the house and let her negotiate a price with you. This will encourage her to think creatively about ways to generate income, while at the same time honing her negotiation skills.
  1. Be their creditor: If your child has grasped the concept of interest, allow them to borrow money from you to make a large purchase. Insist that they pay you back over an agreed period of time, and include a penalty if they make a late payment.
  1. Teach them to track spending: Give them a blank notebook and encourage them to write down everything they spent in a month to get them into the good habit of tracking expenditure and keeping records.
  1. Show them your budget: Your actual budget may be a bit complicated so draw up a simple budget for the household. Expose them to the costs of school fees, bond repayments, car repayments and groceries.
  1. Use age appropriate apps: Once they’re old enough to track expenses, let them download a budgeting app that works for them.
  1. Use teachable moments: Use every opportunity to create teaching moments for your child. For instance, if the dog chews her ballet shoes because she didn’t pack them away, your first instinct may be to shout. However, rather use the opportunity to teach her about looking after her belongings and the value of goods.
  1. Encourage entrepreneurial thinking: Use any opportunity to discuss clever and innovative ways to make money. Show them real examples of people who have come up with smart concepts, discuss how a shop could improve their service or product, or get her to come up with ideas of her own.
  1. Don’t let them believe that the only way to earn money is with a university degree: Having a university degree provides no guarantee that you will be wealthy or successful. Some of the world’s wealthiest people dropped out of university to start their own businesses. Learning should be a lifelong pursuit and should not be confined to three years at university.
  1. Lead by example: Although this may seem obvious, ‘walking the talk’ also means not judging others by their material belongings, not being impressed by people who drive flashy cars and live in mansions, not using money as a weapon or to bribe others, not taking unnecessary risks with your money, not gambling or spending recklessly, and openly demonstrating charitable giving.
  1. Teach them about custodianship: Encourage your child to appreciate that money is not a pursuit, but rather a tool that can be used for great good. Having money means that you have a duty of custodianship to ensure the money is put to good use.
  1. Involve them in family decisions: Life is about choices, so let your child be part of the decision-making. When it comes to buying a new family car, include your child in the decision-making process. This will help her understand that everything you purchase today affects what you can afford tomorrow.
  1. Encourage them to make informed decisions: If your child wants to make a large purchase, set her the task of doing her own research. For instance, if she wants to buy a new skateboard, tell her to research the board she is interested in. Who sells it? How much is it being sold for? Does it come with a warranty? What are the online reviews? What does it cost second-hand? Are their cheaper options?
  1. Set up an online trading account: Once old enough, set up an online trading account and let your child practice with a dummy account at first. Allow her to buy and sell shares so that she can start learning what emotions drive her decisions.
  1. Encourage them to apply for scholarships and bursaries: Whether or not you are able to afford their tertiary education, encourage your child to apply for his own bursaries and scholarships. There is value in learning how to market themselves and how hard work can be rewarded.
  1. Teach them how to give: Philanthropy starts when we teach our children to share with others, and we should reinforce this concept throughout their childhood. Let them decide how they want to use the money in their ‘Give’ jar and then hold them to account.

Have a wonderful day.


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