Instilling good money habits at a young age is essential for your children’s future financial success and stability.  It helps children develop a healthy relationship with money, understand its value, and make informed financial decisions. Especially applicable, when South Africa’s savings rate was at a dismal 0.5% in 2023.

The question is where does one start and when? This guide offers practical tips, key lessons tailored to different age groups to ensure the best financial foundation.

Pre-Grade R (Ages 3-5)

Key Lessons:

The Basic Concept of Money: Begin to introduce the idea that money is used to buy things. Children often observe adults using coins and notes bills, or more often today – credit cards, for transactions at restaurants and shops. These ideas lay the groundwork for comprehending the significance of spending, sharing, and saving.

With straightforward explanations and concrete examples, children can grasp the concept that money is exchanged for goods and services. For example, show them how you pay for items at the store when you go shopping. Emphasise that the coins and notes bills used in transactions hold value and are essential for buying necessities or desires. 

Understanding Value: Teach them that different items cost different amounts as well as the value of coins versus notes. This can be illustrated by comparing the cost of a small toy to that of a larger, more expensive one. Use play money to help them grasp the concept of varying prices. Demonstrate that some items require more saving than others. This helps prioritise spending based on value and cost. Consequently, your child will learn that it’s not just the quantity but its actual worth and purchasing power that matters.

Understanding money in terms of quantity is a vital lesson to teach. Children often equate the quantity of coins or notes they have with wealth. Illustrate, while a pile of R2 coins may look like more money, a single R50 note is actually worth more. You can also play simple games where they trade coins for notes of equivalent value to reinforce this concept. This helps them grasp that different denominations represent different values, and understanding this is crucial for making informed financial decisions.

Activities:

1. Toy Store Play: Use play money and a toy cash register to simulate shopping. Let your child ‘buy’ and ‘sell’ toys to grasp the concept of transactions.
2. Savings Jar: Create a simple savings jar. Explain that saving money means keeping it for future use. Encourage them to save coins for something small, like a treat.

Early Primary School (Ages 6-10)

Key Lessons:

Earning Money: Introduce the concept of earning money through chores or small tasks. Explain that money is earned by working, just like adults earn money through their jobs. Set up a system where your child can earn an allowance by completing age-appropriate chores, such as making their bed, helping with laundry, or tidying up their toys. 

This not only teaches them the value of hard work but also gives them a sense of responsibility and accomplishment. Make sure to provide clear guidelines and consistent rewards so they understand the direct relationship between effort and earning.

Saving and Spending: Teach the importance of saving part of their earnings and spending wisely. Encourage them to divide their allowance into different categories: savings, spending, and perhaps even giving to charity. Use a visual tool, such as jars or envelopes, to help them see where their money is going. Discuss short-term versus long-term savings goals, like saving for a new toy versus saving for a bigger purchase in the future. 

Also, emphasise the benefits of saving money, such as being able to afford more expensive items and avoiding impulsive spending. Help them understand the concept of making thoughtful choices with their spending, reinforcing the idea that money is a limited resource and should be used wisely.

Activities:

1. Chore Chart with Allowance: Set up a chore chart where each completed chore earns a small allowance. Discuss how they might save a portion and decide what to buy with the rest.
2. Goal-Oriented Savings: Help them set a savings goal, like buying a specific toy. Use a visual chart to track their progress and celebrate when they reach their goal.

Pre-Teens (Ages 11-13)

Key Lessons:

Budgeting: Introduce basic budgeting skills to manage their allowance. Start by explaining what a budget is and why it’s important. Help your child create a simple budget that outlines their income (allowance) and expenses (things they want to buy or activities they participate in). Teach them to categorise their expenses into needs and wants, and to allocate their allowance effectively.

In addition, encourage them to set aside a portion of their money for savings and unexpected expenses. Use real-life examples, like a family outing, to show how budgeting helps manage money effectively. By practicing budgeting, they will learn to plan their spending, avoid running out of money, and make more informed financial decisions.

Avoiding Impulse Buying: Teach the benefits of bargain hunting vs impulse buying. Explain the concept of delayed gratification and how it can lead to more satisfying and meaningful purchases. By using examples like saving up for a high-quality item instead of buying cheaper, less durable alternatives immediately. Encourage your child to set savings goals for larger purchases they really want, and help them create a plan to reach those goals.

Discuss the advantages of waiting, including being able to afford something of better quality or having more money saved for other important things. Simultaneously, share stories of personal experiences or use hypothetical scenarios to illustrate how patience and planning can lead to better financial outcomes. By understanding and practicing delayed gratification, your child will develop self-discipline and learn to prioritize long-term rewards over short-term pleasures, which is a crucial skill for financial success.

Activities:

1. Weekly Budget Planner: Create a simple budget planner for their weekly allowance. Include categories like savings, spending, and giving. Review it together each week.
2. Savings Account: Open a savings account in their name and teach them how to deposit money. Discuss interest and how their money can grow over time.

Teenagers (Ages 14-18)

Key Lessons:

Income Management: As teenagers begin to earn their own money through part-time jobs, internships, or other means, it’s crucial to educate them on how to manage this income effectively. Encourage them to track their spending and identify areas where they can save money. Discuss the importance of setting aside a portion of their earnings for savings and future goals, such as college, a car, or a special trip.

Additionally, introduce them to the concept of taxes and explain how deductions work so they understand that their take-home pay may be different from their gross income. By managing their income responsibly, teenagers will learn valuable skills in financial planning and decision-making, setting a strong foundation for their future financial independence.

Long-Term Planning: Introduce concepts like investing, credit, and financial responsibility. As your child enters their late teens, it’s essential to expand their financial knowledge to include long-term planning. Begin with the basics of investing, explaining how investments like stocks, bonds, and mutual funds can help grow their money over time. Use simple examples and consider starting a small investment together to make the learning process more tangible. 

Additionally, teach them about financial responsibility by discussing budgeting for larger life goals, such as higher education, buying a home, or retirement. Highlight the significance of making informed financial decisions and planning for the future. By understanding and applying these concepts, teenagers will be better equipped to navigate the complexities of adult financial life and build a secure financial future.

Activities:

1. Part-Time Job Budget: Help them create a detailed budget for income from a part-time job. Include expenses like cellphone bills, personal purchases, and savings for future goals like studying further or buying a car.
2. Investment Basics: Discuss the basics of investing. Consider a small investment together to teach them how markets work and the importance of long-term growth.

Debt Management

Begin by explaining the difference between good debt, such as student loans or mortgages, which can provide long-term benefits, and bad debt, like high-interest credit card debt, which can quickly become unmanageable. In addition, illustrate how responsible borrowing, when used wisely, can help achieve important life goals such as education, home ownership, and building a credit history. Discuss the importance of maintaining a good credit score, as it impacts their ability to secure loans, rent apartments, and even get jobs in the future.

Emphasise the understanding of interest rates, repayment terms, and paying off balances in full to avoid accruing interest. Illustrate the long-term consequences of accumulating excessive debt, and the advantages of making smart financial choices. By educating them on the responsible use of debt, you equip them with the knowledge to make informed financial decisions in the future