According to the 2015 Fidelity Investments Money FIT Women Study, 82% of the women surveyed indicated that they are responsible for teaching their kids to be money savvy.
“We’re emerging from a worldwide recession and it’s become increasingly important to engage our kids about money as early in their lives as possible so that they grow up to be financially literate,” says Robyn Farrell, Executive Head of 1st for Women Insurance.
50 years ago, the men in the family would manage all the finances with women being completely disempowered in this area – this trend is fast changing. These days, with more women having careers and earning their own money, they understand financial fitness just as well as men and are passing it down to their children.
“In an age where we pay accounts online, and make purchases at the supermarket with a piece of plastic, children don’t get to understand the value of money. Children need to learn that even though they can’t always see it, money is real and it doesn’t grow on trees, or out in cyberspace for that matter,” says Farrell.
“And,” she adds, “learning about money and how to manage it needs to start as early as the age of four.”
While this may sound extreme, Farrell says that allowing your toddler to hand over the money to the cashier at the supermarket illustrates that money is swapped in exchange for something that is needed and, that in purchasing that item, the amount of money they have left will be less.
Farrell believes the best way for parents to ensure that their children are financially competent is to teach by example. This is because children learn a lot about the world through the behaviour of their parents. If parents are prudent about how they spend their money, it is more likely that their children will be too.
She says the role of mothers in this cannot be underestimated because they are generally in charge of the household budget and, children, albeit unwillingly, are often dragged along with them to do the grocery shopping, run errands and pay accounts.
“Mothers must realise that these seemingly tedious tasks are actually prime opportunities for learning for their children,” adds Farrell.
She concludes with some tips for mothers who want to instil good financial habits in their children.
- Introduce young children to the concept of saving by buying them a “piggy” bank and allow them to put coins in it. Every week, tip out and count the money so that they can see how the number of coins grows as they save.
- Include your older children in planning the household budget. Explain the difference between wants and needs and demonstrate how spending should be prioritised accordingly.
- Teach your older children about planning their spending and sticking to their own monthly budgets. Explain that the amount they spend should not be more than the amount they have – whether it be pocket money or cash earned from doing household chores or a part-time job.
- Encourage your teens to read their ATM statements, pointing out how withdrawals and deposits affect their balance. Watching their balance increase as they save is also a source of encouragement.
- Teach your child that they have to payback money they have loaned. If they borrow money from you for whatever reason, deduct a specified amount from their monthly allowance each month until the money is paid back. It is even a good idea to charge them some interest!
- Play games. Monopoly and The Game of Life and apps and online games, for example, can teach money management skills and the importance of planning ahead.
- Talk about money. Let them hear you discuss your financial plan and the arrangements you’re making for retirement, for example. This could simply be having a conversation with your spouse while your children are in the room. In this way, your children can understand that saving is a lifelong endeavour.