Poor parents rarely have to teach their children the value of money. By the tender age of four, a disadvantaged child will begin to realise that money is a scarce commodity and their entire existence depends on the family?s ability to accumulate it. Money to them means a full tummy and a warm blanket.

As one travels up the economic scale, children become more absorbed with the frills that money can buy. They do not have to concern themselves with the basics of survival and they take food and shelter for granted.

It is these children that need to be taught that money is a valuable resource and it needs to be managed carefully. It is no secret that a child who?s every whim is satisfied goes into the world with unrealistic expectations. Financial overindulgence can create dependency and poor money management skills in later life.

Teaching you children a healthy attitude towards money is a fairly simple process but it requires commitment and consistency.

Age 6-12:
A very young child does not understand the concept of money. They see it as magic green paper that enables their parents to get all sorts of cool things in exchange. So what can you do?

  • Help them to learn the differences between needs, wants and wishes. This will prepare them to think through their spending decisions in the future.

  • Introduce them to the value of saving versus spending. For example, explain how they can earn interest on their money and how they have to spend money on interest if they borrow.

  • By giving them a small amount of pocket money each week they get used to the concept of income and expenses.

Age 12-16:
From the age of 12 a child has a fairly clear picture that money is a highly desirable commodity and will try everything in their power to garner as much as possible from their parents.

This is where pocket money can become an extremely effective teaching tool. Tell your child that he or she will receive a set amount of money each week. If they get R20, they must save R5 and do what they like with the rest. Every four months point out how much they have saved and reinforce the habit.

  • Let them draw out money for special purchases, if you stop them from accessing the money, they will see little merit in saving.

  • Teach them how to keep a record of how money is saved and spent. This will help them to see where it all goes and will lay the foundation of budgeting. A simple way to keep a tally is to store receipts in a different envelope for each month.

  • Grocery stores are fertile ground for teaching them how to be frugal. Show them how the different brands have different prices and how the larger packages are cheaper per kilogramme than the smaller ones.

  • Allow them to make their own spending decisions, even if they insist on spending their entire allowance on arcade games. They will soon learn that some spending decisions were better than others.

Age 16-22:
The period between leaving high school and getting a job can range anything from one to five years, depending on the course of study they choose. The issue of when to cut the financial strings can be fraught with emotion and therefore it is vital to discuss the issues before problems occur.

Obviously helping a child to achieve a tertiary education may arm them with the ability to earn a good living but that is not the same as teaching them how to become financially successful. The cost of financing a child through college could easily add up to R50 000 a year.

If you have that kind of money available to help your child, then by all means help but if you are struggling to put money aside for your retirement, you will need an alternative plan.

  • Encourage your teenager to get a part time job. Many kids get Saturday jobs while they are still in school. This goes a long way to funding their insatiable appetite for designer labels and entertainment. When the money comes out of their own pocket they will be more selective about their purchases.

  • If they ask for a loan, make sure they pay it back. You could even charge them interest so that they will learn that it is costly to borrow other people?s money.

  • Once at college, give them a set monthly budget; if you don?t, their requirement for funds will become a bottomless pit. If they know up front that they have R500 for the month, they will make it last. It?s a great lesson for managing their money when they start working.

  • Opportunities abound for people who are willing to work hard and have goals. Teach your kids that they can achieve all their dreams, as long as they have a goal and a level head.

  • Even if you can afford to totally fund your children, practice restraint. They should be allowed to experience the exhilaration of achieving a financial goal.

A young adult:
Once a young adult graduates and starts earning an income, they should be required to contribute to the household expenses, even if you do not require the extra income (you could set the money aside and give it back when they move into their own home).

If they can live expense free, then they will see no merit in saving or learning how to budget. When they finally move out, to get married or set up their own home they will be hopelessly out of their depth when it comes to juggling the bills.

If you have children that have left home and keep knocking on your door for money it?s time to get tough. If you keep bailing them out of financial difficulty they will never stand on their own feet.

  • The first question you ask, when they ask you for money is, ?what is it for??. If it?s for bills they can?t pay, its time to sit down and have a long talk. You can agree to help them, but with two provisos. One is that you pay the creditor directly and the other is that you make it clear that this is the last time you will be paying their bills.

  • If the money is for the deposit on a home you may want to help out, but they must pay you back within a specified period. If they want the money for a luxury item then you should feel no qualms about saying no.

  • If they are continually irresponsible about money, they have to be left to face the consequences. The school of hard knocks can be an effective teacher.

Everyone wants their children to achieve their dreams. Give them guidance, good examples and lots of encouragement and they will be well on their way to financial independence.

You may feel that you owe your child an education but at what cost? Are you prepared to sacrifice your financial independence in the hope that they will earn theirs? To obtain peace-of-mind, it is essential that you first secure your own financial future.