Money forms part of our everyday lives and financial literacy gives us the ability to make informed and sound money management decisions on a daily basis. Decisions such as purchasing goods, saving and investing can all be executed correctly if there is a sound financial literacy base.
The sooner one acquires these skills the better, so when better to start than when your kids are young. There are a different and appropriate terms and concepts to introduce to children at different ages.
“Sometimes parents are hesitant to talk about money to their kids because they feel that they’re not financial experts, their children are still too young to understand financial concepts or their children might make the same money mistakes as them. However, there are different basic concepts and practices that you can teach your kids at different ages that will equip them with the knowledge to make sound financial decisions in the future,” says Eunice Sibiya, head of FNB Consumer Education.
Three to Five
Children in this age group are too young to understand concepts such as finance, saving, budgeting etc, but there are opportunities to introduce basic financial concepts to little ones.
“Many of us have been out shopping, in a queue and waiting to pay and there’s a child wanting sweets or toys. This is a good time to introduce some basic money concepts,” adds Sibiya.
Children at this age can understand that you need money to buy things such as ice cream or clothes. So if you don’t have money, you can’t buy things. Another good tip is to explain to your little one that the only way to earn money is to work, and encourage them to think of ways to earn money, like helping with chores.
Sibiya says, “Explain the difference between “wants” and “needs”. While you’re shopping, point out needs such as soap, food or toilet paper, and describe “wants” as optional items like biscuits, sweets or chocolate.”
Six to Ten
Children in this age group are more aware of money and excited to have it in hand. They might receive money as birthday presents or in the form of pocket money. It is in this age group where parents can teach them the principles of saving and money management. They could even have their own bank account, and manage it, to some extent, but only under the guidance of their parents.
At this age, children can make decisions with money, compare prices and learn how to save.
“Teaching children to save isn’t as hard as you might think. Children have an amazing ability to grasp concepts, especially when you turn a concept into a physical action like having a piggy bank. Taking a coin or two and dropping it into a piggy bank regularly, is the first step to educate your child on the importance of saving a portion of their money instead of spending it all,” says Sibiya.
Eleven to Fifteen
Your child can now understand more complex concepts about finance.
“Teach your children that they need to save a portion of any money they get, whether it’s birthday money or money they received for doing chores around the house. When they reach their savings goal, they can be rewarded with accordingly. Show them how their money grows when they save, and think about matching your child’s savings to encourage them to save more,” says Sibiya.
Sixteen to Eighteen
By this stage, it is important for your child to have a firm understanding of how money works. It is in this age group that they would want to take ownership of their money and they would want to transact on their own. It is important to chat to your children about the responsibility of having money. Parental guidance is still needed to prepare your child to become a financially responsible individual.
“At this stage, introduce investment concepts and the importance of financial discipline. Children at this age should also be working according to a budget, and be able to manage it with guidance from parents,” says Sibiya.
Eighteen and Over
Children at this age should be as financially independent as possible.
“If you’ve done your job correctly, your child will be able to manage their finances on a day-to-day basis, have a bank account and be able to use it responsibly, have a savings and use this for basic necessities, not you,” says Sibiya.
“Having a child is a life-long commitment, and avoiding the topic of money and financial management will only do your child and yourself a disservice. The best thing you can do for your child is to raise an independent and confident individual who is financially responsible,” concludes Sibiya.