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The importance of teaching kids about money
Studies have shown that children who are included in the daily management of their household finances display healthier financial decision-making and understanding when they’re older.
Parents are the biggest influencers of children. Our children rely on us for life lessons, support, nurturing and knowledge, yet there is usually little engagement in the household around savings, money and financial literacy in general. We live in a time of reckless borrowing and lending, and it’s up to us to teach our children that it’s not just as easy as “taking out more credit”.
Kathryn Main, Founder of Money Savvy Kids (MSK) says that the snowball effect continues to hurtle through South Africa and Africa as a whole. “As if raising children in a tough climate isn’t hard enough, we now need to try and balance it all while navigating a professional life, a personal life, finances and life in general,”
As a mother of three, Kathryn’s parental instincts recognised the difference that financial literacy could make in a child’s life.
She suggests the following tips to teach your preschooler about money:
You can already raise a money savvy kid from a very young age. Kathryn says parents can start the money conversation with their four-year-old by appealing to the child’s imagination. All children make believe when they play – whether they are saving the world or having a tea party with their imaginary friends, they use their imaginations to make sense of the world around them. This means that parents don’t necessarily have to buy expensive toys to teach them about money. Making fake money can do wonders in teaching your child where money comes from and how it is earned.
Here is an example:
Suggest an arts and crafts session to your four-year-old where she makes her own money. Use this as an opportunity to teach her about money so she takes a step towards understanding the inner workings of the real world. You can start with, “Did you know that money is made by the Reserve Bank?” And when they ask questions, fill in the blanks for them.
Remember to use statements that will evoke them to ask more questions. Here is a list to get your child interested:
- Did you know that there are other types of money other than the one we use every day?
- Do you know how Mom and Dad get money to buy everything in the house?
- Do you know where we keep our money safe?
Hurling these statement and questions at your four-year-old while you make your fake money is a fun way to get them interested in the institution of money and get them to understand how money will be an integral part of their future. It’s your job, after all, to talk about financial responsibility with your kids.
Once you are done creating your new currency, you can start to explain the concept of money and how it is spent in the household by using your pretend currency as a physical substitute. Use the pile of notes to represent the money that Mom and Dad earn to ensure that the family has everything we need. Now list the family’s monthly expenses – this can range from groceries to entertainment, and draw from the pile for each. This shows how the family spends money monthly. You can explain how the remaining money from the pile goes to savings like the family holiday or her future education. Despite what many parents may think, children understand money because they are exposed to it every day either at home or when they are with friends at school.
Why it’s important to teach kids about money
“Studies show that 74% youth are not involved or included in the daily financial management of their household. However, results showed that children who are involved display a higher propensity to save, more cautious spending behaviour and a better understanding and knowledge of financial products,” says Kathryn.