Raising your child to be financially educated

By Stephen Katzenellenbogen

You don’t have to wait to leave a monetary inheritance for your children, instead, help them develop healthy saving and spending habits now that will prepare them for future financial freedom.

As parents we have an important role to play in teaching our children the value of money. These lessons should not be limited to lessons on saving money, but should be extended to how to spend.

I was shopping with my kids a few months ago when my son asked me to buy an expensive Lego set. “Put it on your map,” was his solution when his Lego claim was denied.

You still have to pay for whatever you spend with your credit card, I explained, adding that you have to earn enough to cover your expenses. Since “spend less than what you earn, buy less than what you can afford” is my personal mantra, I only spend on my card what I can afford to “pay off” at the end of each month. .

Having decided that my children would benefit from a discussion about money at this point in their lives, I adapted a story from a children’s book, “More Than Enough,” distributed by Foord Asset Management. Here is what I told them:

  • When squirrels get older, they don’t have as much energy as when they were young, and they like to rest and enjoy the forest a little more. However, when squirrels are young, they are full of energy and need to collect as many acorns as possible, for different reasons:
  1. They collect acorns so that they and their families can eat.
  2. They harvest acorns for the winter in case food is more difficult to find during those months.
  3. They also collect acorns when they are old and lack the energy or the ability to go out and search for acorns.
  • These three reasons translate easily into our daily life and are the motivation for both earning and saving:
  1. Earn so you can buy food and clothes, pay rent or a deposit, pay school fees, and maybe even go on vacation.
  2. Create an emergency cash reserve in case things don’t go as planned – for example, anticipating unforeseen expenses, job loss, health problems, etc. You can also add long term insurance to this pile of acorns; it is an essential part of an investment portfolio for you and your family in the event of death or disability.
  3. Save money for retirement.

Principles of disbursement

Arguably as important as why to save, it is imperative to teach children how to spend their earnings and savings. I have often heard friends say proudly that their children save all their pocket money. This means that they continue to spend their parents’ money … thus losing a valuable opportunity to learn a lesson in the value of money.

Following our squirrel tale, my kids started getting their own pocket money and managing their own credit cards (debit cards for now, but they don’t know the difference yet).

I told them that half of the pocket money was going into an “expense account”, for the purchases they wanted, and the other half into a “savings account”, not to be touched until the end of the day. age 18. months into each spending and savings account, and have a separate trust for each that they probably won’t know about until adulthood. The important thing is not the amount, but the principle.

There is already evidence that the lesson about spending is taking hold. Over the past few months, my children’s drinking habits have changed. What started out as spending on trash and candy has turned into waiting a few months of spending money to get what they really want.

They sometimes ask me how much their savings account has accumulated in order to be able to weigh a purchase. Every child has had a birthday since we started and all cash gifts from family and friends go to the expense account. Their savings accounts earn interest, albeit at a ridiculous rate, which is an opportunity to show them the free money (interest and compound interest) they earn by leaving the pot alone.

The time has come

We have a duty to teach our children about money and, more importantly, the value of money. This doesn’t mean that your only goal should be to find a job that pays the most. It means understanding where you are and where you want to go. Financial security, I believe, is within reach of most people, although it means different things to different people. If you earn R30,000 a month, for example, you’re unlikely to drive a Ferrari and go on an annual vacation abroad, but you can probably put something aside for your future.

It’s never too late to start learning about money and saving – it’s never too early either.

Stephen Katzenellenbogen is a Senior Executive and Wealth Manager at ONF Wealth Management


Raising your child to be financially educated

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