By: Mariska Oosthuizen
How the F(inance) does one talk “money” with one’s kids? A 2024 Her Money Mindset survey suggests as many as 20% of parents don’t talk “money” with their children. A T Rowe Price study found that 41% of parents feel anxious to discuss finances with their kids. Honest money conversations are critical to instil foundational financial literacy. More than that, they can bring families closer together and normalise “money talk” early on. The bottom line? it’s time to talk about Project F – finances.
Speaking about finances makes money less intimidating and familiarises kids with the foundational concepts from the get-go. This is exactly what Sanlam’s Project F campaign aims to achieve. We want to get people to speak about money more. This is directly linked to improved mental health, better financial decision-making and improved outcomes.
Parents often wait until their kids are older to start speaking about money. However, Cambridge University behavioural researchers revealed that children start learning about money from as early as 3, with most of their attitudes about money formed by 7. It’s hugely advantageous to weave age-appropriate money talk into your everyday parenting early on. Sharing with kids also makes them feel respected and included. It allows you to model and vocalise the behaviours that could set the course for their mental money scripts and formative money memories.
Five critical money conversations to consider having with your children:
1. The value of money and how it’s earned
Why it’s crucial: Understanding the value of money is the foundation of financial literacy. Teaching children that money is earned through work helps them appreciate its worth. Explain the various ways people earn money, whether through traditional jobs, entrepreneurship or investing. Discussing your own work and how it translates to money can make this concept more tangible.
How to discuss it: Use real-life examples to explain your job and what you do to earn money. Use play to model key concepts. For example, set up a pretend shop and let your little one sell you their toys for R1, R2 or 50c to familiarise them with coins and the idea of exchange. Later, start to introduce chores, for example, keeping a room clean, for small sums, to instil the understanding that money is earned through effort.
2. Spend, save, give
Why it’s crucial: Mac Gardner, a financial planner and the author of “The Four Money Bears”, says one of the earliest and most fundamental behavioural patterns kids pick up from their parents is spending habits. Our observations are our first teachers. Children see their parents spend money but don’t always observe what’s happening behind the scenes – hard work, saving, investing and giving back. It’s crucial to vocalise the behaviours and practise them together.
How to discuss it: Introduce the concept of a simple budget, dividing a child’s allowance into spending, saving and giving. Use jars to visually represent the categories. Encourage them to set short-term and long-term savings goals, such as saving for a toy or a special outing. Share what kinds of causes you support and give your child some options of charities they could save for as well. Then talk through some of the things you spend your money on and why. Gently, keep bringing it back to the fact that you work hard for the money you spend.
3. The difference between needs and wants
Why it’s crucial: Distinguishing between needs and wants helps children prioritise their spending and understand that they cannot have everything they desire. This lesson is crucial in developing wise spending habits and avoiding impulsive purchases.
How to discuss it: When shopping, involve your children in making decisions by asking them whether an item is a need or want. Discuss why certain purchases are necessary and others optional.
4. The basics of saving and investing
Why it’s crucial: Familiarity with banking concepts and the role of interest helps children understand how money can grow over time and the benefits of saving and investing. The knowledge is essential for them to navigate financial systems effectively in the future.
How to discuss it: Open a savings account for your child and show them how deposits work. Explain how interest accrues on savings and why it’s beneficial to keep money in a bank. Use simple, age-appropriate language to make the concepts clear. For an older child, try drawing a piggy bank with R10 inside it. Draw a R1 coin next to it. Then, draw R11 inside the piggy bank. Now, draw R1.10 next to that. This shows them how money grows each year it’s invested.
5. The impact of debt and credit
Why it’s crucial: Understanding debt and credit is vital for making informed financial decisions. Teaching children about the consequences of borrowing money and the importance of maintaining good credit can prevent future financial pitfalls.
How to discuss it: Explain how credit cards work, the concept of borrowing money and the responsibility of paying it back with interest. Offer your child the opportunity to borrow R5 for the shops if they promise to pay you back later that day, plus an extra R1 in interest. Let them know that if they don’t pay you back on time, they’ll have to pay an extra R2.
Money talk should ideally be part of your day-to-day chats. Every time you’re in the shop, ask your kids to compare products not just by price but also size, for example. Set shared family savings goals to work towards, like a holiday. Having these essential money conversations with your kids and being open about finances from a young age is crucial to normalise discussions about money and instil strong foundational finance lessons early on. This proactive approach sets the stage for a lifetime of financial confidence.
* Oosthuizen is the chief marketing officer at Sanlam.
PERSONAL FINANCE