Youth and Money
Most children’s attitudes to money are shaped by their parents – and they tend to absorb much more, and much sooner than we sometimes realise.
Charnel Erntzen, Managing Director of National Debt Advisors says: “From online take-away foods and shopping – we live in an era of instant gratification. With Covid-19, lockdowns and the subsequent economic effects on households, we need to start having conversations around money with our children. As parents, we have to change our mindset and culture around saving, debt and money on the whole – and then pro-actively encourage our children to do the same, so that the next generation is better equipped to interact with money”
Here are a few tips on dealing with your money and your children:
Don’t be reluctant to discuss financial issues with children
Children are very much aware of what is happening around them. Rather have open, frank discussions about household finances with them, than have them make up scenarios in their head.
Don’t sugar-coat things
They don’t need to know exactly how much you earn, but they should be aware of the overall financial situation of the household, so that they know what the boundaries are.If the household is struggling, tell them about it, so that they too can change their lifestyle and mindset – and try and help the situation. For example, if you make them aware that there is no money for a particular big-ticket item for the next six months, it will stop them asking in anticipation every month. This can take alot of emotional pressure off the family.
Don’t underestimate your children’s intelligence
Children are clever and learn from what they see. If they can interact via a cellphone, then they can transact via money. Take them with you when going to banks, ATM’s and when you pay with your cards. Most banks have accounts for children. Open an account for them and let them start interacting and being responsible for their own money.
Explain to your children the impact on your debit or credit card when shopping online. Some children think there is are infinite financial resources at their disposal – and unless you have told them otherwise, can you blame them for their child-like assumptions?
Teach them the difference between wants and needs
Children sometimes have a huge sense of entitlement and are oblivious to what is a necessity that they need and a luxury that they want. It is our jobs as parents to educate them on this.
Teach them that cash is king
Not all debt is bad, but debt can very quickly spiral out of control. If you are already in debt, discuss with them the cost-cutting measures you are going to take as a family get rid of that debt. Encourage them to avoid becoming over-indebted by saving and paying cash for goods as far as they can.
Sadly, these days it is common to find young people leaving matric, gaining employment at R5000 per month – and then soon having debt repayments of R4500 a month. This often leads to a vicious debt spiral which could take decades to emerge from. No one wants that for their child.
Don’t let children traumatize and torment you with excessive demands
Don’t put yourself into debt to appease a child who makes demands for name- brands and unnecessary things. You will end up suffering and having to literally pay for the consequences.
Teach teenagers to save and be more money – savvy
Once children leave the primary school phase behind them, you can actively push the idea of saving for long-term goals. Teenagers are usually very reluctant to save on their own, as this is the stage of their lives is where any pocket monies, or earnings from part-time work will probably be spent on airtime, data and entertainment with their friends.
This is the perfect time to teach them about compound interest, savings and investments. Set a big savings goal (a deposit for a vehicle perhaps) and offer to match what they save – and if they borrow money from you, give them a time period in which to repay you. Let them know that there will be consequences for missed and late payments. They may think this harsh at first – but once they get out into the real world, and need to start building towards a well-maintained credit record in order to access credit ( a home loan particular) they will get to appreciate these lessons.
Erntzen: “ Living in an over-indebted household not only causes financial distress, it also causes emotional distress. At NDA, we see too many families torn apart because they haven’t learnt to speak about money – and end up looking for solutions when it is too late. Now, more than ever we need to open the lines of communication with our children about money. The more informed they are, the more financially free they will be in the future”