Educating children on the value and consequences of money as early as possible can go a long way to preparing them for the real world. In a country with a poor savings record like South Africa, instilling early lessons about how to handle money and investing can make all the difference to the financial outcomes they achieve as adults – better equipping them to grow and accumulate wealth. We may shy away from talking about money but doing so can help to ensure our children are better able to grasp financial concepts and can avoid some of the costly mistakes many of us make from simply being unprepared to work with money.
“Pocket money can be used as a tool for financial education,” says Ronald King, Head: Public Policy & Regulatory Affairs at PSG Wealth. “Decide when, how much and how often you will give pocket money and start small. It is also important to set down some rules, as well as exceptions should your kids ask for more cash.”
If you reward chores with pocket money, it is best to ensure you do so only for special jobs that go beyond regular household chores. “This gives a sense of responsibility, as well as shows that some tasks are more valuable than others. It’s important for children to understand that money doesn’t often come easily and that more can be earned if you put in hard work,” King says.
It’s a good idea to negotiate guidelines around how much money should go into saving, spending and charity. If you can teach your children to save first, proportionately to their pocket money income – or from a part-time job when they are older - you can demonstrate that even a little can go a long way, as the power of compounding takes effect. King says you can instil the discipline and priority of saving in your child, which will carry through to their adult working life and only benefit them exponentially. It just takes practice.
“Another top tip is to pay pocket money on a specific date each month. This demonstrates that money isn’t available on tap and promotes patience. Your child will soon realise that money needs to last in between ‘paydays’.”
It might be difficult to know when to discuss money with your children, or what to tell them. Here are some tips for three different stages and ages that can help. 
5 THINGS 5-YEAR-OLDS NEED TO KNOW ABOUT MONEY
- You need money to buy things.
- Coins can be exchanged for other good stuff.
- The toys they see on TV won’t look as awesome or work as well, at home.
- Saving money can be fun when they use it to buy something later.
- They will not get everything they ask for, and there is a difference between needs and wants.
5 THINGS 10-YEAR-OLDS NEED TO KNOW ABOUT MONEY
- They will have to pay for their own trading cards, movie tickets, snacks, or other expenses out of their allowance.
- They will not get an advance on their allowance unless they can provide a valid motivation.
- They should be able to navigate a supermarket with a cart and a list.
- They should have a savings account and learn that although they can withdraw their money, it won’t be the same cash and coins they put in.
- They will not get everything they ask for.
4 THINGS 16-YEAR-OLDS NEED TO KNOW ABOUT MONEY
- They will have to pay for their own entertainment and clothing out of their allowance and earn extra money if they want to buy more.
- They should have a reasonable idea of the family’s finances and realistic expectations for university.
- They should save half of everything they earn from a job.
- They will not get everything they ask for – this is a timeless lesson to keep in mind.
A financially-savvy child is better equipped to achieve a successfully independent future. “It’s in your hands as a parent to educate your child about financial matters, and it is also in your own best interest to do so, as it will benefit you both financially in the end,” King concludes.
 Source: Raising Money Smart Kids, Janet Bodnar.
Ronald King, Head: Public Policy & Regulatory Affairs at PSG Wealth