FNB has published a list of the best ways to give your kids a financial head-start in life, including how much pocket money you should give, what you should allow them to buy, and when you should be saying “no”.

According to a 2016 study by the Organisation for Economic Co-operation and Development (OECD), South African adults are some of the most financially illiterate in the world, with only 30% being able to score five out of seven or higher in a basic financial literacy quiz.

On average, just 56% of adults across the globe achieved that score, which is considered to be the minimum target for financial literacy.

South African children then – who adopt many of the financial habits of their parents – are at a distinct disadvantage when it comes to their own financial futures.

According to Eunice Sibiya, head of consumer education at FNB, children, irrespective of age and background all around the country, are being taught bad money habits by their parents.

“While we all want what’s best for our children by ‘protecting’ them from the world of money, this can also be detrimental to the way they handle their finances later on in life,” she said.

Here are five ways to make sure your kids have a more solid foundation for their financial future.

1. Breaking through the ‘money shield’

“By shielding your child from how finances work you are unintentionally putting them on the back foot,” according to Sibiya.

If they are fairly young you can get your child to pay for something in the queue and also help them identify the difference between a want and a need. You don’t need to go into detail but can simply show them that they will be paying more for the same item if they buy it on credit.

And, conversely, this is a good time to teach them how interest can work in their favour, because if they put the money in a savings account not only will they be able to pay for the item in a few months, but they will also have a bit more money to spend on something else that they like.

“Introduce them to simple money concepts as soon as you can. Older children may even have the ability to grasp more complex concepts such as compound interest or credit,” she said.

2. Give them (some) control

“By giving your child some measure of control over their own money you will be empowering them to make important financial decisions,” said Sibiya.

“Set up a bank account and, under your watchful eye, let them make their own transactions such as airtime purchases or swipes.”

As a result, Sibiya notes that this is one of the quickest ways for children to learn about fees, and how some transactions, such as electronic transactions, are better for their bank balance than say, withdrawing cash.

3. Allow them to make their own purchases

This falls into the same category as not giving your child control; it is easy to simply buy something for your child outright, or tell them you can’t afford it and move on if you are in the store, noted Sibiya.

But stopping and making your child think carefully about their purchase will put them in good stead for the future.

“If your child points to something they really want, make them weigh up the options of purchasing it by asking if they can afford it.”

In that way, they will have to consider how much money they have put away and whether the cost of the item is worth it.

“You can help them come to a decision or gently steer them if they look like they will blow all their money on a plastic action figure. But the point is that if they have blown all their cash on something the previous week, they won’t have money for something they really want and that is how real life works.”

4. Don’t give too much pocket money (and teach them to save)

Giving children too much pocket money can be detrimental to future good financial behaviour.

“This is not how the world works,” noted Sibaya.

“In some of the schools I have spoken at, children are given R50 every single day,” says Sibiya. “They aren’t in the habit of saving it so they feel that they must finish the money every day as they will be getting the next cash injection tomorrow.”

“Discuss with your partner about how much is a reasonable amount for pocket money. Most importantly, encourage your child to save a portion of it.”

5. Let them learn your good habits (and try to fix your bad ones)

Children often learn bad financial habits through the actions of their parents, noted Sibiya.

“If we as parents demonstrate good savings habits and even better spending habits on a daily basis, our children will be educated through our actions. It is not only about what we teach, but also about what we do, that will mould their behaviour.”

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