Let’s Talk Cash with Kids and get them Financially Fit

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South African parents are reluctant to talk to their children about money management, consistently coming in pretty low in the Global Financial Literacy Barometer metrics. Why is this?
 
 Is it because our parents never spoke to us about money or are we just not comfortable with the topic itself and find it more difficult to approach than others? 
 
 From the birth of our first child we prepare for “the talk” about puberty and coming of age. When it comes to talking about money, however, parents seem to avoid it entirely or don’t tell their children the truth. We don’t have to be experts ourselves to start a money conversation with our kids and it’s never too early or too late. 
 
 Start by creating the concept of money: money is real, money is earned and it does not grow on trees or come from ATMs. In today’s cashless world, it’s easy for children to believe there is an endless supply of money when you don’t get to touch or feel it.

From as early as the age of six you should open a savings account for them, let them be the ones who deposit their pocket or birthday money and let them be the ones who withdraw the money from the ATM. They will really surprise you. Give them an allowance and be clear what the allowance can be spent on. Some families link the allowance to chores around the house like making their bed, feeding the dog or washing the dishes. To earn extra let them do some of the bigger chores. 
 
 By working for their money, children are much quicker to learn its value and tend to spend money earned slower than they do money given. Learning at an early age that you can’t have everything is a tough but important lesson to learn, teaching us the difference between a want and a need. It’s as tough to teach as it is to learn so set the boundaries and don’t give in.
 
 Now that they have some money, help them set a plan with it or it will quickly burn a hole in their pockets. When saving for something special, help them understand how much it costs and how long it will take to save up for it. To incentivise my kids to save I have often equalled their savings at the end of each goal which has really motivated them to commit to the plan.
 
 As kids grow up, their ability to manage more complex decisions increases and so should their responsibility when managing money. Tie that to the expectations set by friends and social pressures, changes in taste of clothing and the endless need for airtime can quickly put a dent in your own budget if you let it. 
 
 When my eldest daughter turned 15 we moved away from a traditional allowance and started giving her more control of her own expenses in the form of a social fund. A social fund should take into account buying items of clothing and toiletries they really want and going out with their friends. Although my daughter was now getting more money every month, she was faced with the decision on how to spend it: she could either go out or buy the jeans dad’s budget wouldn’t buy. She soon started making smarter purchase decisions, saving more and building a better understanding of money management. 
 
 But with an increased allowance comes increased risks so make sure you know how the money is being spent, guiding your child so that their purchases are not unhealthy, unsafe, or get them in trouble. With the right guidance children will rise to the challenges we bring them, start by maintaining an open and honest dialogue about money so we don’t make the same mistakes as our parents did.

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