According to Beth Kobliner, author of the award-winning book ‘Get a Financial Life’, children as young as three years old can grasp basic financial concepts such as saving and spending. And a report by Cambridge University revealed that children’s money habits are formed by age 7. As the number one influencers of our children’s behaviour, this lockdown provides the perfect opportunity to use every day, teachable moments to enhance our children’s financial literacy.
Identifying and counting money
So much of what our children are exposed to online is based in US Dollar currency. In addition, as we move towards an increasingly cashless society, our children have less exposure to hard South African currency and, in doing so, are in danger of missing out on valuable money skills. Growing up in a cashless world can create problems when it comes to teaching children where money comes from and what value it holds. Use this time to teach your children to identify the range of South African notes and coins, and how the various units work. You could easily incorporate this into one of their maths lessons to reinforce counting, units, addition and subtraction.
Where money comes from
Most children have no concept of where money comes from. A great children’s book which is also available as an e-book is ‘This history of money – from bartering to banking’ by Martin Jenkins. If you are working from home during the lockdown, this is the perfect opportunity to show your children what you do for a living and how it generates an income.
While our intentions may be good, most of us never get around to using the ‘save, spend and give’ jars effectively. As an activity, let your child make and decorate their three money jars and then commit to putting the ‘save, spend and give’ strategy into full action. Let your child decide on a toy or treat they would like to buy after lockdown and name the ‘save’ jar after that goal so they have something they can visualise and work towards. Discuss charitable giving with your child and let them choose what they want to do with their ‘give’ money. The Covid-19 pandemic has created so many opportunities for charitable giving that your child can get actively involved in, such as sewing masks, making sandwiches for the needy, or preparing food hampers for shelters. As lockdown will limit your child’s ability to use the money in her ‘spend’ jar, use the opportunity to encourage her to save extra for a ‘rainy day’.
Before doing your online shopping, help your child to make online price comparisons to show her the value of doing research, taking advantage of discounts, and making her money stretch further. Keep it simple by comparing the price of five essential items such as bread, milk, eggs, butter and toilet paper between two large retailers.
Budgeting and shopping
Once you’ve decided on where to do your online shop and armed with your shopping list, allow your child to shop online with you. Be sure to point out any discounts and special offers that are being advertised, while at the same time educating him about price and value. Every time you make a purchase, be sure to visit your ‘shopping basket’ so that your child can see the total grow with every ‘Add to basket’ click.
A child’s ability to delay gratification is one of the greatest indicators of their future financial success. Our limited access to shops and services creates the perfect opportunity to teach our children the art of being patient and waiting for something that they want. Online deliveries are slower (and confined to essentials goods only), we can no longer just ‘pop to the shops’, and tighter budgets all round means that most of our children will have no choice but to learn what it feels like to delay gratification.
Keep two or three bills aside so that you can show your child how to make online payments. This is a great way to show how bank accounts work, why banking privacy is important, and what transactions you can perform online. You might want to pay your child’s pocket money electronically so that he can see the money ‘move’ from your bank account into his bank account.
Reading bank statements
Once you’ve made a few online purchases and payments with your child, download your latest bank statement and go through it with her. If she’s old enough, set her the task of finding and highlighting the online shopping purchases and payments on your bank statement, and checking that the amounts are correct. While you’re at it, go through other items on your bank statement with her so that she can learn to appreciate what things such as wifi, fibre, DStv, cell phones and groceries cost every month.
The value of money
Likely, your domestic worker is not working during the lockdown, so now is the perfect time to allocate age-appropriate chores to your child. List the chores that you need your child to complete each day and attach a rand value to each chore. Not only will this give your child an appreciation for the important job that domestic workers play in our lives, but it will provide important lessons on the time value of money and help create a connection between hard work and reward.
Wants versus needs
With retailers restricted to selling essential items only, now is a great time to discuss the difference between ‘want’ and ‘needs’. Have discussions about what products are allowed to be sold and why we need them, and which products are prohibited from being sold and why they are not considered essential. You may want to extend the conversation further to explain why some expenses, such as visiting a doctor or buying electricity, are regarded as necessary, whereas other expenses, such as buying toys or having your hair done, are regarded as non-essential.
If your child is old enough, you can introduce the concept of tax when paying them for chores. Once you’ve explained to them where money comes from, expand the lesson by explaining that some of the money they earn must be paid to the government which is used for the benefit of the whole country. Introduce a tax deposit box where a portion of everyone’s allowance or pocket money is collected every week – with the clear understanding that at the end of lockdown, the family can decide how to use the money to treat themselves. On your child’s list of chores, include a tax column to indicate how much tax he needs to put in the tax deposit box for each chore.
Children must understand the concept of compounding interest as early as possible. A great way to demonstrate this is through the use of a year-planner and a large bag of jelly tots. Place a jelly tot on the first day and tell him that if it’s still there tomorrow, he gets two jelly tots placed on day two, and so on. Don’t worry that the maths is all wrong – it’s the principle that counts. Let him watch his jelly tots accumulate as the days go by. You can reverse the game to teach him about debt, so for every jelly tot, he eats he has to give you two in return the next day, and so on.
If your child is older, start introducing them to the stock markets by setting up an online, demo share trading account. Have discussions about which types of companies would do well in a pandemic, such as medical technology, pharmaceuticals and technology; and why other companies might not do so well, such as travel companies and restaurant chains.
There are some fundamental money concepts that all children need to know before reaching adulthood, and the sooner you start the better. If you’re in lockdown with young children, use this time to build financial literacy and education into your homeschooling curriculum.