In South Africa, where more than half of a consumer’s income goes to paying off debt, teaching children about leading a debt-free life has never been more important. This task may be onerous but taking these steps will ensure your children grow up to be debt-savvy adults.
Kudzai Mahachi, financial adviser from DebtBusters, tells us how.
Educate them about saving
You need to teach your children to save money by buying them a piggy bank where they put in coins at a young age. Whenever you give them money, ask them to put a portion of it away. When they ask you for money during the month, tell them to look in their piggy banks.
Another thing you can do is play games such as Pay Day and Charge Large that will teach your children about saving. Research shows that a great deal of learning happens while children are playing. You can download games which you can play together on the phone as a family. The children will not even realise that you are giving them a lesson, but as time goes by, they will start recollecting the things that they learnt and apply them when necessary.
Open a bank account
Introduce your children to banking programmes where they can open accounts for investments, so that they can see them grow with interest.
This will teach them at a young age that they can benefit from interest. It will also help them envision the results of investing more when they grow up.
Help them differentiate between good and bad debt
Your children should know that not all debt is bad. Some debts are good and necessary.
For instance, mortgage loans and student loans are investments and will help them in the future. However, borrowing to buy luxuries like clothes and cars can be detrimental.
“Depending on their age, it is important to sit your children down and give them practical examples of the household assets – for instance your property and cars,” advises Mahachi.
Teach them to live within their means
If you have ever gone shopping with your little one, you’re certainly familiar with the abrupt demands and the tantrums they throw when you cannot meet those demands. Mahachi says this is the right time to teach your children about budgeting. He says your children must know when you can and cannot afford something.
“Always teach your children to live within their means when it comes to finances. This will help them not to always go the credit route when in need of something,” he says.
Walk the talk
The parents are often the child’s role models. Even though you may not be aware of it, your children are watching your actions and will try to emulate them.
“As a parent you should lead by example when it comes to managing debt,” says Mahachi.
When paying up accounts take them with you so that they know how it is done and teach them that these accounts need to be paid on time, he adds.
They say train a child when young, and he will not depart from it in later life. This adage cannot be truer when it comes to teaching your children about debt. Until next time,
The MoneyShop.co.za Team
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