All of us want our children to do well and to grow up to be independent, money-wise adults, but how do we as parents or guardians teach children about money?
Teaching children about money takes a bit of planning and preparation. If you don’t do the planning and research you could end up like us.
A few years ago, when the children were little, we put a few hundred Rand a month into their accounts and after a year there was less in the account than what we had put in.
The fees were more than the interest. If you want to teach your child about banking and saving, you need to do a bit of homework.
If I, as a child of 10 years old, saw my money decrease in a year, that certainly wouldn’t encourage me to save anything. And this was in a children’s bank account from a major bank.
So what do you do?
It’s important for children to understand that all saving is not the same, and all banking is not the same. If in your research you can involve your children from the beginning, so much the better.
Talking to children about money is very important because children learn from you whether you talk to them or not, and rather they ask you the questions, than make their own ideas.
A friend was changing jobs and they were moving to a new area, so they were selling their house and things had been tough, so they had been saying to their kids, there’s no money for this when they asked and at some stage the 6-year-old turned around and said why have we got no money, you and daddy work very hard and we’re selling our house and there is never any money for the toys I want.
Because they never talked to their 6-year-old, thinking he was “too young to understand, he made up his own mind, and decided that they were poor, had no house and couldn’t buy toys.
Like everyone else, some people save naturally and others spend naturally, so work with your child’s personality, and find what motivates them.
When you start the conversation explain that there are really three types of saving:
Short term – money to be spent during the month for airtime, tuck at school and whatever else they use during the month. This money needs to be immediately available. This is what we all call a current account
Medium term – buying something that they want, but can’t afford in one month, they have to save for it for a few months or a year or two, like an expensive video game or cricket bat or an expensive pair of jeans. This money can be invested where it takes a bit longer to get it out like 32-day call account
Long term – this is saving over years and I always say to my kids, this is where you save for the deposit on your first decent car or maybe even a house.
What this means is that you need to find three different places to put money, because these three options are different and need different approaches to achieve a profitable result.
First, let’s look at the short term account, this is where you put the money to start with and then transfer to other accounts for the medium term and long term accounts.
Look at what your child needs to be able to do on the account:
Buying online – kids of today make online purchases, shoes, Takealot, Wish and many others. Not all bank cards allow you to do online purchases so check.
Banking online – they need to be able to do their banking online. A banking app would definitely be an advantage. They must be able to top up their airtime/data through this bank account, check if the account has online alerts where the child gets an SMS if the balance goes below a certain amount, or when they make a purchase, this is very important in the fraud-filled world we live in.
Stop orders – they need to be able to transfer some of the money to the medium and long-term accounts and if it goes off automatically when you can’t forget to transfer.
Bank costs – one needs to be careful of bank accounts that offer a bundle of services for a set fee – if your child doesn’t need all the services, then it’s a waste. Here check things like Admin fee, cash deposit and withdrawal fee, how much to withdraw from an ATM. Many accounts offer free transactions as long as there is a minimum of about 300 – 500 in the account.
The same bank as parents – it’s often easier to have the main account at the same bank as the parents
That’s the things to look for when you are opening the short-term account, after which you transfer, ideally by stop order to the medium term account.
Medium term: This where you save for some bigger items, the cricket bat or matric farewell outfit. You can link to a savings account and check here for high interest, low-cost savings accounts.
Another option is 32-day notice accounts, these are good because you need to plan and release the money before you purchase, so you can’t just buy on impulse.
Long-term: Here some of the best options are shares in their different forms. Things like unit trusts are safer, but buying a share can be very satisfying and it connects the child to a company that they can see every day and you will find that they want to buy shares in companies that they know
EasyEquities is a share trading platform that is easy for the beginners and easy to use and the fees are straightforward and among the lowest in the industry. Here you can also buy parts of shares because some shares are very expensive 1 share in Old Mutual costs about R3 900, so look at EasyEquities or if you have another platform then investigate that.
Start talking about money to your children, and get them to start getting into the habit of saving, it’s probably the best gift you can give your children.
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