Teaching Children about Investing: A Fun and Rewarding Approach

 

By Caty Naudé CPF®

 

As a financial advisor, I regularly see the need and value of financial literacy from a young age. Teaching children how to manage and invest money wisely is crucial for their future financial independence and how they think about financial planning as adults. It is essential to recognize that the approach to saving and investing should evolve with the child's age, sources of income, and financial responsibilities.

 

Adapting Savings Guidelines for Different Ages

As parents, we should teach our children to save a percentage of every Rand they receive, just like adults save and invest a certain percentage of what they earn. Children receive money from various sources at different stages of their lives—pocket money, birthday cash, or gifts from relatives like grandparents. As they grow, the purpose and amount of their funds change, and so should the percentage they save. For younger children, who typically have fewer financial obligations, saving a bigger portion of their income is more feasible. Implementing a rule like saving 40% of their pocket money is a great start. Putting away a portion of their earnings teaches them the habit of saving and helps them understand the value of money early on.

For older children, especially teenagers, who might incur more expenses or wish to spend more money on social activities, a lower percentage, like 15%, might be more realistic and sustainable.

Practical Implementation

A young child receiving R100 from their grandparents might save R40 (40%), saving for a long-term goal such as a new toy or a special outing. On the other hand, a teenager receiving R200 as pocket money might save R30 (15%), balancing their immediate wants with the need to plan for future expenses like concert tickets or school trips.

Parental Involvement: Providing “Investment Growth”

Parents can introduce a matching system to make the process more engaging and reflective of real-world investing. For every rand saved towards a predetermined goal, consider matching a portion of it; this could be a 50% match or even a 100% match, depending on what's affordable for the family budget. This enhances the child's savings and imitates how investments can grow through interest and dividends, providing a practical lesson in how the financial market works.

Track and celebrate financial success

Keep your child engaged by adjusting the approach as they grow. Depending on their age, you can use apps or visual graphs to track progress towards goals. Keep the learning process dynamic, celebrating milestones by arranging a special outing to purchase the item the child saved for, or taking them out for a milkshake to celebrate them reaching their goal. Also, discuss the impact of additional growth on invested money and urge them to ask questions or tell you about how they experienced the savings journey. This keeps the learning process dynamic and directly tied to their interests and age-specific goals.

Conclusion

Start this educational journey with your child today, lay the groundwork for their financial future, and teach them the Ascor Independent Wealth Managers way of “Planning for tomorrow, today.” Providing your child with financial education is more than just teaching them about money management—it's about fostering a sense of confidence and vision that will empower them throughout their lives. By adapting your approach as your child grows, you prepare them for the complexities of adult financial responsibilities and set them on a path to financial success.

 

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