The Easter holidays are a great opportunity to break the mould and initiate a financial fitness programme that will set your children up for financial success.
The Easter holidays are family time, and this year it would be great to supplement your children’s high consumption of chocolate eggs with some straight talking about finances. Talking about money is often difficult but is very important. The more your children learn about how to make wise money decisions, the more likely they are to achieve financial independence.
In fact, approached in the right spirit, talking frankly about the role money plays in building a fulfilling life can be a tremendous bonding experience for family members, especially if they all help in setting financial goals and then working together to reach those goals.
In the long run, starting a family financial fitness programme will ultimately help create the inter-generational wealth that creates prosperous families and countries.
Building good money habits should begin as young as possible – a study by the University of Cambridge suggests that money habits are formed by the time a child is seven years old. A good starting point is a see-through piggy bank or jar so that kids can see the money mounting up. This money can then be taken out of the jar to buy something, driving home the lesson that things cost money.
As your children grow older, help them understand the need to make trade-offs between purchases. For example, if they buy that video game, they won’t have money to buy a milkshake with their friends. Another great technique is to avoid paying allowances, but rather ‘commission’ on various chores – this will help teach children that life is not a free lunch.
Later on, teens should be sensitised to the power of giving. Not only does it give one a good feeling, but it is a way of exercising agency in a confusing world. And, if they are worried about the environment, they could invest in an environmental project.
An important lesson is how to be content. One of the least positive aspects of social media is that it’s a showcase of an often artificial ‘best life’, and it can make even privileged young people feel short-changed. One simply has to keep on urging them to count their blessings and make them realise that what they see on social media is not always true.
As early as possible, teenagers should be taught about the mechanics of their finances. Open a bank account for them and make sure they understand how credit cards work – the siren song of credit has lured many onto the rocks. Introduce them to the magic of compound interest and let them get inspired as the rands multiply.
It begins with the parents
But the real foundation for a lifetime of good financial decision-making is following the example of one’s primary role models – your parents. Seeing how parents discuss money matters rationally, set goals and come up with strategies is powerful, not only in demonstrating how to run the family finances, but also in how to conduct a satisfying, mutually beneficial relationship.
I can suggest two good ways to start building a financially fit family. One is to set some common goals, such as saving for university, and a short-term goal such as a family night out at the theatre. The second is to introduce the family to the benefits of being a unit when it comes to banking. At Nedbank, we call this accumulating value. The principle is simple: we all use financial services so why not use them to gain what is in effect some passive income?
The engine of value accumulation is the desire of banks like Nedbank to persuade clients to give them more business. To do that, they will provide incentives. For example, by having your personal loan and vehicle finance with the same bank, you could qualify for cashbacks or reduced rates. We have calculated that an individual earning R20 000 per month can gain 2% of that in these benefits or incentives simply by making a few tweaks to how they manage their financial affairs.
A way into this mindset is to get everybody to bank with the same bank. Spouses and children will qualify for discounts, which mean more money in each person’s pocket. It’s worth calculating exactly what this means in real terms to drive the message home.
Value can also be accumulated by devoting some energy to working out exactly how the bank’s loyalty reward programme works, and how to make the most of it. This could be a useful group exercise to demonstrate the kind of approach one needs to identify and then seize value.
To build a financially fit family, get your children onto the training programme young. Show them how it works by setting goals for everybody to work towards and accumulate value easily by just being smart.
Job done – now for a guilt-free Easter egg!
