Teaching Children the Value of Saving Money
As a parent, one of the most important lessons you can teach your child is the value of saving money. By instilling good financial habits from a young age, you can set your child up for a lifetime of financial stability and success.
Teaching children the value of saving money
According to René Grobler, head of Investec Cash Investments, and Brodwyn Von Brughan, principal and insurance broker at Brod Von Brughan and Associates CC, teaching children the value of saving and money management is crucial for their future financial well-being.
“It’s important to have a conversation with your children about money,” says Grobler. “This includes concepts like the value of money, spending wisely, and understanding the difference between instant and delayed gratification.”
Von Brughan adds that parents should include their children in family budgeting to show them responsibility in real-time. “If parents have a good relationship with money, and they approach life with optimism and hope, then the kids will see life the same way,” he says.
Fostering a Healthy ‘Money Relationship’
Grobler emphasizes the importance of making these discussions relatable and practical, using everyday examples to help kids understand these concepts better. “Parents shouldn’t shy away from having these conversations from an early age with their children, adapting the conversation to be age-appropriate,” he says.
Including children in family budgeting
The Time Value of Money
Grobler advises parents to open interest-bearing savings accounts for their children to see how their money grows. This can help them grasp the concept of how inflation can depreciate the value of money and how compound interest can increase it.
“If a child has R100 pocket money that they put away at the end of the month, and just left it in the bank at a 7% interest rate, then at the end of the year, they will have R107 in their bank account,” Grobler explains. “But, if you then have R107 at the end of the year and you earn another 7% on top of that the following year, the interest you earn in the second year will be higher than the interest in the first year.”
The power of compound interest
Teaching the Rule of 72
Grobler explains that an easy way to teach kids how to save is by defining the rule of 72. “This tells you how many years it will take to double your money – if you leave it to earn interest at a certain interest rate,” he says.
The rule of 72
Ensuring Your Child Saves as Much as Possible
Grobler emphasizes the importance of making kids see saving as more important than spending. “One of the things you can do, as an adult, and also teach your child from a discipline point of view, is to share the concept of budgeting,” he says.
The importance of budgeting
Money Responsibility and Creativity
Grobler suggests involving children in small purchase decisions and encouraging them to come up with ideas to make money. “Not only should kids start understanding early how to spend money wisely, but teaching them to ‘hustle’ and talking to them about ways to make money is also important,” he says.
Making money through creative means
By teaching children the value of saving and money management, parents can help them develop good financial habits that will last a lifetime.
