Save a little, spend a little, give a little…
It’s never too soon to give your children an understanding of money. Not that many of us have that understanding – but an awareness is essential. It not necessary to open a savings account for under 10-year-olds. This can wait until they receive a worthwhile allowance.
Until then it is suggested that children are encouraged to divide their pocket money into ‘save a little; spend a little; and give a little’. And they should have allocated chores so that they are earning their pocket money.
Some experts advise the 50-40-10 rule for children. That means 50% of their pocket money goes to savings, 40% to spending and 10% to donating.
For older children starting savings accounts teaches valuable financial lessons such as:
- Instilling the importance of saving for a longed-for item, budgeting, and delayed gratification.
- Seeing their savings grow, and developing a sense of responsibility and discipline that will serve them well in adulthood.
- Learning how compound interest can turn small, regular contributions into a substantial sum over time.
- Learning about the banking system and how to manage their money digitally. In our increasingly cashless society, these skills are vital.
- Encouraging them to discuss choices about how to spend money wisely and compare prices.
Start by including your children in some of your small decisions –
- explain why you pick one item over another at the grocery store,
- give your children a few rand and tell them what you need from that amount,
- while shopping, allow your children to hear you ask, ‘do I really need this? would it cost less somewhere else?’,
- compare prices for an item they would like – online and in store,
It is essential to explain the downside of shopping online, so know the websites your children visit. Impress upon them that sharing personal information such as birthdate, address, phone number, or school could be dangerous – as well as costly. In fact, insist your children get your consent when buying anything online.
