“South Africans must prioritise creating good financial habits from an early age,” says Claire Klassen, Consumer Financial Education Specialist at Momentum Metropolitan. With an alarming youth unemployment rate of 46,5% and a generally low savings culture, it is becoming increasingly important to teach our youth the basics about money, saving and investments. “The sooner young people start learning positive financial habits, the better equipped our future generations will be,” she says.
Klassen points out that financial education starts at home. Families can play a part by starting the process early and introducing basic financial concepts to children from an early age. Children learn from seeing and doing more than they learn from theoretical knowledge. Parents should therefore take heed in the time they have to cement behaviours in their children, which will last a lifetime when applied.
The key is to teach them about money, saving, and spending in simple terms so they can understand and adapt their approach as they grow older, and their financial needs evolve.
She offers seven tips for families to start teaching children basic financial concepts:
- Leading by example: Children learn from observing their parents’ behaviour, it is therefore important to lead by example. Practice good financial habits yourself, such as budgeting, saving, and making informed spending decisions. Show them how to be responsible with money. Help your children understand the concept of needs versus wants and encourage them to allocate their money accordingly.
- Saving and goal setting: Encourage your children to set savings goals. Teach them to save a portion of their income, whether it is from allowances or part-time jobs. Help them understand the value of delayed gratification and the benefits of saving for future needs or wants.
- Introduce banking: Teach your children about basic banking concepts, such as opening a savings account and managing it. Explain the concept of compound interest, and how it can help their money grow over time.
- Involve them in financial decisions: As appropriate, involve your children in family financial decisions. Discuss major purchases, budgeting for vacations, or saving for a big-ticket item together. This will help them understand the decision-making process and the trade-offs involved.
- Teach them about debt: Explain the concept of responsible borrowing and the responsibilities that come with it. Discuss the differences between good debt (investing in assets) and bad debt (credit cards and clothing accounts when used irresponsibly). Emphasise the importance of responsible borrowing and the consequences of accumulating too much debt.
- Encourage entrepreneurship: Foster an entrepreneurial mindset by encouraging your children to explore their interests and hobbies. Teach them about creating and managing a small business, including budgeting, marketing, and customer service.
- Teach the value of giving: Incorporating giving into financial education helps cultivate a balanced financial life that includes not only personal financial goals but also contributing to the wellbeing of others. Children who learn to share their resources and give to others experience the joy of helping, which can lead to a lifelong habit of giving back. Learning to allocate funds for charitable purposes teaches children to prioritise their spending and make conscious decisions about where their money goes.
“Early financial education is crucial for breaking the cycle of poor financial decisions. By proactively seeking resources and empowering yourself and your family with knowledge and practical financial habits, individuals can become more financially savvy,” says Klassen.