How to teach children about money

We made a podcast, The F Word, but it is all about money. The title "F word" comes from the fact that "money" is seen as a swear word in our society — even more so when people are at home.

The truth is that your kids will learn about money somewhere else if you don't teach them. Schools don't teach it very well, and you don't want American media to teach them, because they will learn how to live a life full of debt and buying things.

There are only six out of every hundred people who can retire independently in South Africa. We need to give our children the best chance to be one of those six people.

There are several concepts you want to teach your children, and you can do so in several different ways:

1) Managing Expenses

Kids should learn early on that they can't always get what they want, even if they (you) can afford it. Giving them options is what you want to do. That's why it's a good idea to give them some money to work with.

Example: You can get either the new computer game or the new shoes.
Choices are what life is all about.

2) Make Extra Money

If your child wants the extra pair of shoes and the new video game, that's a good chance for them to learn that if they work hard, they can make extra money and then buy whatever they want.

Ideas:

• Take out the trash
• Clean their rooms
• Wash your cars

Older kids can learn how to be entrepreneurs so they can sell something or make something of value to earn extra money.

3) Start to Save

It's smart to teach your children how to save money by setting aside 20% to 40% of their budget or income for a big expense. This teaches delayed gratification, and if they want something big in the future, they have to forgo short-term pleasures.

You can also start to teach them the difference between investment and saving when they are in high school.

Examples:

• Set up a bank account in the child's name and give them "interest" if they save a certain amount each month
• Open an investment account directly for the child

Financial responsibility starts with the parents, and it is never too early to start training your kids to be smart with money.

The things you teach your child will have an impact on their life for a long time and will compound, just like investments.