Building financial confidence starts when your children are young

South Africa is a country of people with different cultures, religions and ethnicities. Yet, despite our differences, we have more in common with one another than we realise - particularly when compared to other cultures around the world.

One area in which we fall short is developing financial literacy in our children. Be it the parents, guardians or in the education system, not enough is being done to prepare the next generation for a secure financial future.

Classroom conversations lacking

I attended an all-boys school. I don’t recall any conversations about money in the classrooms.

We received life lessons from our teachers that often deviated from the lesson plan – a move orchestrated by us as pupils to steer them off on a tangent. I only recall one lesson where we spoke about earning interest on savings or paying interest on debt. I did not study accounting at school, so I don’t know if the topic was covered better in those classes.

I don’t even recall having conversations about money with my parents growing up. It was only when I went to university and studied accounting that my dad and I would talk about money.

For most people I would imagine their first real conversations around money occur when they start working. At that point you have many competing priorities, often resulting in people failing to act decisively and wasting years managing their finances with little effect. It is a pity because time is your best friend when it comes to growing your money.

Money shouldn’t be taboo

We are often raised to believe talking about money is taboo. But it is such an important part of daily life and we should be talking about it much more as families and communities.                

As a financial planner I see that money evokes a variety of deeply personal responses in people - from fear to arrogance.

“Money doesn't change people, it just magnifies who they already are,” American author and life coach Tony Robbins says.

As parents we try to protect our children from “bad” things in the world. For some reason, we believe this includes money. But we don’t do our children any favours by not educating them about money as soon as possible.

But teaching them about something that will have an impact on multiple fronts in their lives going forward is empowering, and children need to become financially literate as soon as possible.

Make a plan with these ideas

So, we should do what South Africans do best: “maak ’n plan”. And this plan starts with you taking an active role in your children’s financial literacy education. Like the “birds and bees” conversation, do you really want them to learn about money from someone other than yourself?

Although the approach, and the age at which you start, will depend on the child, here are some practical ideas:

Get them their own wallet or purse and make them pay for certain items when you go to the shops. You want them to see that money is a physical thing and not just numbers on a screen.

Once they have learnt about physical money, you can introduce them to a card or mobile payment – possibly from their own bank account.
A bank account helps teach children about interest because it provides a real-life example of how value increases over time when money is saved.

Open an investment account which includes exposure to different asset classes. No matter how big or small an investment you make, contribute regularly to teach them financial discipline. Children learn mainly from what they see. On many of the online platforms there are no minimum investments, or they are very affordable. An investment account can expose them to many financial concepts, such as time value of money, asset classes and the relationship between risk and return.

Include them in the budget discussions around the house.

When they are old enough, let them sit in on your meetings with your financial planner.

Let them get a holiday job or pay them to do tasks around the house that would not be considered part of their usual chores.

Have frank and honest conversations with them regularly about money and finances. It's obviously a lot harder with younger kids, but you can adjust the conversation for their level of maturity.

Watch kids’ financial literacy videos online together.

Exactly how you choose to educate your kids is up to you because you know your child best. But try to use it as a bonding experience and something that you can do together, making it fun and creative.

You can also use this as an opportunity to upskill yourself about financial concepts.

The lack of financial literacy in some South African adults is alarming and compounds the problem.  Your kids will face many hardships in their lives, don’t let financial illiteracy be one of them! Invest in their future by educating them.