Friday the 20th of November is Universal Children’s Day. To mark this, personal finance website JustMoney quizzed some kids about what money means to them. They found that many children recognise the importance of money, and the value of saving as a means to fulfil their dreams.
JustMoney asked the children four financial questions to measure their understanding of the subject. Tip: To hear more of what the children had to say, watch this video.
What is money?
Almost all of the children understood that we need money to buy the things we want or need. As five-year-old Imaad and four-year old Mikail said, we need money to buy food, drinks, and of course ice cream, suckers, pillows and toys. Others such as ten-year-old Anru and nine-year-old Racheal understand that money is used to buy a house, pay your bills and take care of your children.
Why is money important?
Data, transport, fruit, school fees, water, and snacks were some of the items that the kids mentioned. “You use money to get something that you need or you’ll probably need in the future, like a house,” says Ruvarashe, a nine-year-old. She says money is also used to buy a car. “Money is important because you use it to pay your school fees, buy food, water, and other important stuff,” says Mihle, a nine-year-old.
What is saving?
According to 12-year-old Shasmeen, saving means putting money aside in a deposit account or investment fund. To seven-year-old Jordan, it means putting it in a piggy bank.
Why is it important to save?
Racheal understands that saving will keep her from borrowing. “I can just take out my own money and buy what I want,” she says. According to Kauthar, a nine-year-old, if you save you might have a lot of money to buy nice things. “Saving is important so you can do something big that you always wanted to do,” says Mkhanyisi, an 11-year-old.
“If you don’t save, you’ll never have enough money to get the things that you want,” says Anru.
The earlier the better to instil a savings culture
According to Sarah Nicholson, commercial manager at JustMoney, talking to your kids about money is vital. It gives you the opportunity to instil good money habits and a healthy savings culture in your children from a young age. “This could mean the difference between them growing up to be financially responsible, secure individuals, or individuals who are unable to manage their cost of living,” says Nicholson.
Cowyk Fox, managing executive of everyday banking at Absa, says that engendering an appreciation for the power of savings (including delayed gratification) and teaching the next generation about the power of compounding at an early age are important steps in the road to financial independence.
“Financial wellness is not an event but a journey. Helping children understand money, how to manage it, and the importance of savings are crucial life lessons,” he says.
Yashen Singh, CEO of premium core banking at FNB, agrees. “By building good money management behaviours from an early age, you will enable your children to make more informed financial decisions when they reach adulthood, making them financially resilient and independent.”
Hints and tips for parents
Teaching your children about money can seem intimidating, but you may already be well on your way without even knowing it.
1. Start young – the traditional approach is to buy your toddler a money box, so they can see how their money can be saved and how it can grow over time.
2. Use everyday events – your shopping trips, your bill payments, games and books to bring financial concepts to life in a fun and practical way.
3. Set the example – show your children what it means to be financially responsible by paying your bills on time, setting aside emergency funds, and saving up for special treats.
4. Teach your children about budgeting – help them set goals for the things that they want and tick off financial milestones on the way. If you give your children spending money, or compensate them for chores, this could be deposited into their account and could be saved towards their goals.
5. Let them save for a major purchase – this will help them to become accustomed to delayed gratification, also helping them understand the difference between needs and wants.
Fox says parents need to impart lifelong principles of money management to prepare them for independence. This includes savings, responsible spending, learning how to make pocket money last longer, and how to operate an account.
“Teaching children the difference between wants and needs, early on, is a great lesson that will stand them in good stead,” concludes Nicholson.
“Your children will be bombarded with temptations to spend as they grow up. Putting in the groundwork now, and instilling some basic financial learnings, will help them to make sensible decisions later and avoid the stress of debt.”