During the month of October I attended a function hosted by Investec Bank on raising a future and financially fit generation. The enlightening conversation was led by Nikki Bush, creative parenting expert and Sameer Rawjee of the O School. They were talking about helping our kids grow their net worth in a fast changing world.

Going into the function I felt very confident about my parenting skills because I had just had a conversation with my eldest son who is 6 about the gifts he received from the tooth fairy. The tooth fairy has visited him twice in the past three months leaving him with R30. So he told me that he would be keeping the money in the piggy bank and letting it grow so that he can buy the FIFA 15  game which his friend  told him costs over a thousand rand. So I was quite impressed by this young man’s long term thinking.

Two weeks after the Investec event we were in the car after I had picked him up from school. He asked me if I could lend him R5 for the tuck shop for the following day as he didn’t have any money. I was surprised by his request and asked him why he wouldn’t use his tooth fairy money and his answer was that it’s only R20. I had to probe further as I couldn’t understand what the issue was with the R20 note. In the midst of his frustration with me not understanding his predicament he asked me whether he should tear the R20 note into four pieces.

Suffice to say that I was happy that at least his maths was working fine but concerned about him wanting to tear money instead of asking for change.

This drove most of the points raised at the function home. The key one being that the money conversation starts at home, with the parents. And that parents should not outsource the financial literacy of their children to the teachers as the teachers are already overwhelmed.

Nikki mentioned the following challenges which prevent parents from passing on financial skills to their children:

1.    Easy money that doesn’t teach value

What do our kids have to strive for or towards if they get everything that they ask for or want?  This is evident in the types of parties some kids get as well as the kinds of holidays they have access to, things which leave them with little to aspire for in the future.

2.    Children who cannot connect money with effort

This happens where parents do not talk about the exchange that happens in order for one to end up with money. Be it the exchange of a service or a product.

3.    Children who inherit while they are young

This has the potential to kill their drive to succeed.

4.    Not teaching children to wait and giving in to their demands

This makes it difficult for the children to understand investing and concepts like the time value of money (how money grows overtime if you keep it and do not spend it) or compound interest because they want things to happen now.

5.    Lack of consequences for bad behavior

Kids who never get to experience the consequences of their actions such that they are able to be more cautious tomorrow. It could be for example a child whose cellphone’s screen breaks and that phone or screen is immediately repaired or replaced. Kids like these never get to know the real financial impact of their actions.

Nikki gave the following suggestions to help children to develop financial intelligence:

  1. Kitchen finance

This includes getting children involved in drawing up the grocery list, taking them with when one goes to buy groceries, allowing them to select the items on the list and also check the prices. A reader commented on a previous post on financial lessons from my mom, that her mom used to make her calculate the grocery bill as they shopped for groceries from aisle to aisle at the store, ensuring that there were no surprises when they got to the till.

 

  1. Playing financial board games or buying toys that teach finance skills

These can be about shopping or gambling. Games like these teach kids about risk, being money wise and financially fit e.g monopoly.

  1. Giving children an allowance

It becomes an early lesson on budgeting as they get to decide how they spend the allowance. The allowance could be spent on entertainment, at the tuck shop or saving for big items that they want. The key thing is to allow children authority on how the allowance is spent. It also teaches them about charity at a young age as they can use part of the allowance for the Sunday collection or for gifts for friends and family.

The conversation left me with a lot of homework about raising our brood of 3 kids under six and I cannot wait to experiment with some of the suggestions that came up during the conversation.

What are some of the ways you employ at home to teach your children about finances?