Teaching our children about money is not something we should leave up to the schools. Although some financial content is covered in classes, many children leave school with a lack of understanding about mortgages, credit ratings and personal debt.
One major problem with this is that by not understanding debt, younger generations quickly accumulate credit which they spend recklessly, and then cannot repay. This would leave many people with a difficult financial future, unable to gain a mortgage and finding it difficult to live day-to-day in a financially viable way.
So, where do we parents start? Make sure that what you are discussing is age-appropriate. This great site talks through some topics to consider at each age group.
For example, from the age of 8, you could start to discuss how you earn money and what a salary is. Then you could discuss how this goes to contribute to monthly expenses like the food bill or the electricity bill. The more you familiarise them with the terminologies of finances, the more accessible it will be to them.
Here are just a few items to consider chatting with to your older children in an informative, but casual and honest way:
Debt: Wonga South Africa, a ‘same day’ cash loan provider, recently released this blog post about why you need to understand debt. You need to discuss with your children about good and bad debt, according to their blog. It’s OK to get help with finances by applying for credit when you need it – but make sure that the debt you are accumulating is considered to be ‘good.’ So for instance, obtaining a car through credit might be considered good debt as it allows you to get to work which earns you money. Spending out on a holiday might be considered bad debt as this is not really something you need. Wonga suggests you ask 3 questions – do you need it? Can you afford it? And, how much will it cost you overall?
Savings: Many people fail to save effectively and so it is important to teach your kids about saving from an early age. Perhaps you could suggest saving ¼ of their pocket money each month to start with. Many banks allow you to set up a children’s savings account and this can also help to encourage them to hold back money early on.
Salaries – of course you’ll want your children to earn well in their future, and so it is important to encourage them to do the best they can and earn a regular income. Education will help them achieve the job that they want – so ensure they know the importance of heading off to school now and studying hard, as everything impacts their future. It can be difficult for children to see the bigger picture. They are, after all, just children and need to enjoy their innocence. However, there is no problem in explaining about the importance of school and getting a job periodically to remind them of this.