By Wilma Bedford
By teaching your children about money from an early age, you teach them one of the most valuable skills with which to tackle life. Children as young as three years old can understand the concepts “save” and “spend” and by the age of seven children’s money-handling habits have been shaped.
Children learn their habits from their parents, which is why it is the parents’ duty and privilege to teach their children to be responsible consumers, investors, savers and givers.
Forbes recommends that certain concepts and philosophies have to be taught by a certain age. By ages 3-5 the child has to learn about delayed gratification: you have to wait and save until you can buy something you would like to have. Between the ages 6-10 the child must learn about choices regarding how to spend money; money is a limited commodity and when it is all gone, it is all gone. By 11-13 years the child must learn the value of long-term saving and compounded interest. If your child wants to receive tertiary education, 14-18 is the time to look at the value of money and to talk about budgeting, loans and the consequences of borrowing money. At this stage the child must understand what the family budget is, where to apply for loans and how loans will be paid back. By 18+ your child may already have a credit card and it is extremely important for him to realise that a credit card needs to be used responsibly: it should only be used if the total balance at the end of the month can be paid in full. It is easy to incur debt which not only results in high interest, but also influences credit credibility.
Taxes, savings plans and inflation will always be with us, so teach your child these concepts from early on and cultivate healthy money habits in your child. Here are a few tips:
1) Show your child your municipal account or any account on which tax is levied. Explain that the deduction is applied to benefit everyone, e.g. street repairs. Deduct from your child for “tax” and explain that it will go towards the mutual use of the household, e.g. dishwashing liquid or toilet paper. Put the money in a jar so that your child can see where it is and spend it on something used by the entire household.
2) Let your child perform tasks which you would have had to pay someone else to do, e.g. raking leaves, mowing the lawn of painting the courtyard. Withhold payment to drive home the concept of “no work, no pay”. Deduct a percentage for “tax”, but pay your child in cash so that he needs to calculate the percentage himself.
3) Teach your child about interest and explain the value of saving. If you made an investment for your child, show him the interest being earned and explain the concept of compound interest.
4) If your child wants to borrow money from you, explain the interest will be levied against the same rate as that of the bank and that the money has to be paid back within a certain period, otherwise there will be repercussions, such as attaching of a valuable item. Let your child enter into a contract with you (the creditor) and adhere to the terms, as in the real world a contract is a legal document that holds consequences for non-compliance.
5) Teach your child how to budget. Rash spending today leads to “famine” tomorrow. Too many snacks and sweets today mean less or nothing for the rest of the week.
6) It is extremely important for your child to learn that the family’s money matters are private, that he should not discuss his money matters with others of even listen to other children’s money stories. Explain to your child the accompanying dangers.
7) A simple bookkeeping system that shows debit, credit and detailed expenditure will help your child to see on what he has spent his money, what he wasted and how he needs to budget to be able to afford a big item in a few months.
8) Also teach your child how to spend; what I have is merely borrowed and it is a Godly instruction to give to charity. See that your child’s allowance is big enough for him to be able to give a tithe to a welfare institution of his choice.
9) Be an example and advisor for your child.
The Money Advice Service. Dr David Whitebread and Dr Sue Bingham. University of Cambridge Habit Formation and learning in Young Children.
The 5 Most Important Money Lessons to Teach Your Kids. Laura Shin.Forbes Staff https://www.forbes.com