Financial education is a complex subject, often fraught with even more complex emotions. Whatever your feelings about it, money is something we cannot live without and, as such, the better we understand and manage it, the more likely we are to be comfortable with it, in a way that ensures our financial stability and independence.
BetterBond’s latest stats show the average age of the first-time home buyer to be around 38. When you consider that most home loan periods are 20 years, or 25 years in some instances, that takes one close to the age of 60 before your home loan is paid up, which means you have less time to put these monthly bond amounts into other savings vehicles, such as retirement annuities.
A bond is effectively a savings vehicle in that you’re paying money towards something, a very large asset, that you will eventually own and, as such, the sooner you enter the property market, the more time you allow yourself to save and accumulate wealth in this way. But the fact that the average first-time buyer, at 38, is likely to have been working for around 15 years, it begs the question about the financial education of young people around property and affordability, and savings in general.
Surely this points to a need to educate our children about money from an early age? So much of what we understand about money, its power and influence, comes from what we observed and experienced with our parents. Whatever your own early experiences of money were like, it’s up to you to teach your children about money in a way that seeks to empower them to make rational decisions around money and helps them understand the value of money.
1. Patience is a financial virtue
Depending on their age (and temperament!), teaching a child about the need for patience, and why not everything can be had or done at a moment’s notice, is particularly difficult but such an important lesson when it comes to making money work for you.
If there is a toy, game or experience they really want, tell them that they can have it only if they put their pocket money towards it for a set amount of time.
2. Money is all about choices
Whether you have a little or a lot of it, there are always choices to be made about money. Rather than shy away from decisions, embrace them and use this as an opportunity to teach your children about money. Look for situations in your daily life to start a conversation about how to make decisions around money. Discuss the considerations, ask them their thoughts, point out the pros, cons and possible outcomes of various scenarios. The point is to create awareness around the fact that money means choices and decisions, and the more financially literate you are the more likely you are to make decisions that contribute to long-term financial stability and independence.
3. Save, save and save some more
South Africans are known to be poor savers. 10X Investments’ 2019 Retirement Reality Report revealed that almost half the respondents in the survey indicated that they are not saving for retirement at all. The importance of saving cannot be overstated, and the earlier you introduce the notion of saving to your children the better.
Open a savings account for them and encourage them to get into the habit of saving a percentage of the money they receive, be it their pocket money, birthday money or earnings from a holiday job, into a savings account. Take the time to teach them about interest and how the more you save, the more interest you’ll get.
4. Property is a tool for building wealth
Property is a great case study for teaching children the basics of investing. Explain that while the home costs money every month, it’s a good debt to have because you’re paying towards something that will be an asset one day (assuming the property is bonded and you’re not renting). Add that the more that gets paid into the bond, the less the interest will be and the sooner the investment can be leveraged for acquiring further assets.
At the end of the day the most important thing is to talk to your children about money in a way that is age-appropriate and that stimulates their own thinking around money and the value thereof in a productive way.