How to teach your children to save and invest

Teaching your children to save and invest is one of the most important life skills you can impart to prepare them for the future, especially since South Africans are not known to be great savers and investors.

It is up to parents to teach their children to do better in a culture of spend, spend, spend, but what is the best way to do it? Franc, an award-winning app that helps South Africans save, invest and learn about investments, has now developed child accounts that parents can link to their own.

It takes a few clicks to open an account and then a few seconds more to open a linked child profile and all you need is your child’s birth certificate. You can also lock the account for a specific period of time to remove the temptation of using the money for something else.

Dr Thomas Brennan, founder and CEO of Franc, encourages parents and family to stop giving children another silly toy and rather choose a meaningful gift, such as the gift of compound interest by starting to save and invest early for children.

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Help a child to invest instead of buying a toy

“When their next birthday comes around and people ask about what to give your child, you can let grannies, uncles and friends pay a small gift into the account by simply using the child’s reference when depositing.”

The account can be funded with a stop order, once-off deposits via EFT or instant EFT or even directly from the parent’s own Franc account. Brennan says this is the best way to let your child see the benefits of long-term savings in an investment account.

Consumers are often intimidated because investment products are so complex, but Franc has minimised the complexity by narrowing the investment choices to just two funds, the Allan Gray Money Market (cash) and the Satrix 40 ETF (shares).

The Allan Gray Money Market Fund available on the app provided a return of around 5.2% over the past 12 months and the Satrix 40 ETF has returned 10% a year on average over the past 3 years and 9.2% on average per year over the past 10 years.

No minimum investment amounts are required and you can withdraw your money any time without penalties, while the fees are low and transparent and it is easy to check how the investment is doing on the app.

If you are still holding on to your bonus, you can also deposit it in Franc to save for different goals, such as your child’s education, family holidays, or your child’s first car. You can also add a childcare worker, domestic worker, or gardener and start savings accounts for them too. Another benefit is that Franc offers simple educational content to help you improve your financial knowledge.

If you do not trust an app much, you will soon be able to invest directly from a Franc web portal.

Franc was created to make investing extremely simple and affordable and to ensure that, in just a few minutes via the app, anyone can invest for themselves or their dependents in leading cash and equity funds with no minimum investments and no paperwork.

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Tips to teach your children to become money savvy

Brennan shares these tips to teach your children to become money savvy:

• Teach them how much everyday items cost and involve them in drawing up the shopping list and sticking to a budget.
• Encourage them to use their pocket money to buy special items, such as a particular toy.
• Introduce them to the concept of interest on money saved and show them the benefits of consistent long-term savings by opening an investment account where you can see interest earned.
• Involve your children in planning family outings and holidays on a budget.
• Entrepreneurial discussions at the dinner table can involve people who are successful and what they did to achieve their success. Brainstorm creative business opportunities and how failures can help on the way to success.
• Be a role model for the behaviour you would like to them to emulate, such as living beneath your means, shopping for specials and saying no to credit.