Teach your children how to spend wisely
Some ideas to help parents as they teach their children financial responsibility.
According to Francois le Roux, a certified financial planner, to determine when, in what way, and how much to divulge to your children regarding family wealth is never easy.
However, by keeping them in the dark, you run the risk of raising children who are ill-prepared for their future financial situation.
Le Roux says children need to be primed, at least to a certain extent, to handle the level of wealth that will presumably one day be coming their way.
Conversations about money make most people uncomfortable.
“It doesn’t come as a surprise that many parents struggle when it comes to opening up about their financial situation with their children, who are likely far less versed in the socially-accepted hush nature of such matters,” says le Roux.
He warns that while these parents may think they are encouraging hard work and stability by not disclosing their wealth to their children, they may in fact be fostering a sense of financial ignorance.
“This is why any discussion of wealth you have with your children should always be paired with deliberate conversation around the values and responsibilities associated with that wealth.
“These values, which should be introduced and discussed in an age-appropriate way, include budgeting, generosity, use of debt and, above all, the notion that money is a tool, not a toy,” he says.
Le Roux adds regardless of what is discussed, as a parent, it is your attitude and behaviour towards your finances that will likely inform your children’s approach towards money.
“Explain to children the journey to accumulating wealth, and managing it, is an onerous and complicated affair which requires hard work, focus and great skill.
Having money means someone has made great sacrifices to accumulate it, and it should therefore be treated with respect, and not accepted as a given,” says le Roux.
As parents, le Roux says you can lead by example by being open about:
• The benefits of keeping a budget to track expenses.
• Not spending everything, but keeping a reserve or emergency fund for rainy days.
• Investing, and particularly the power of compound growth.
• Explaining needs versus wants, including a a roof over your head is a need and a new game is a want.
• The vital role of work to be a long term success in life.
When asked at what age a parent should begin instilling these financial lessons, le Roux says parents should speak to their children about family values and beliefs around money in their formative years.
“Research seems to suggest children can be taught about money from the age they can start counting.
“Coin identification could be a good starting point at this stage, taking a child on a trip to the bank, explaining its role, and explaining the real meaning of money in the context of the value you receive when parting with it.”
Advice he highlights is, as a parent, while emotional support can be limitless, financial support should not be.
“Whatever pocket money allowance or additional money is given to a child should come with clear parameters about its application, use and enjoyment.
“It should be clear that this allowance comes as, and remains, a privilege and not a right,” says le Roux.
