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16 April 2008

Teach kids about finance

Children learn a lot at an early age, teaching them good money management early will last them a lifetime.

Nina's story:
'Penny and I have been friends for as long as I can remember. When we were kids we used to go shopping together with our pocket money. My mom and dad used to give me a specific amount every month and told me it was my responsibility to manage it. My mom showed me how to work out a simple budget, and if I wanted something I couldn't afford, I had to save up for it. It frustrated me and I sometimes thought my parents were too strict, especially since Penny's parents just gave her money whenever she asked for it.

'These days, even though Penny earns a good salary, she's struggling to make ends meet and is always in debt. Her parents have retired and can't afford to give her the money she needs. Now I realise I was the lucky one all along.'

Mary-Joe Emde, a financial advisor with a background in psychology, says, 'It's very important to teach your children financial independence when they're young, as they'll have time to learn and experiment with money. If you do everything for them, they won't have the confidence to make certain decisions or take responsibility for their actions. Children learn a lot at an early age, so if you lay the foundation properly, they'll be well adjusted individuals who understand the rewards of good money management.

'Many parents buy their children whatever they want because they feel guilty as a result of a divorce, or because they work too much, and this can create unrealistic expectations on the part of the child. Teach them that money has value and that if you use it cleverly, it will go a long way.'

Mary-Joe believes you shouldn't distinguish between girls and boys when it comes to pocket money, as women need to be independent these days. 'Teach your daughter at a young age that she can control her own finances and future.'

What's available?
Some of the major banks offer the following products:

Absa's Mega U Account is for children and teenagers up to 18 years of age. It's easy to use and costs are low, as you don't have to pay Absa ATM and debit-card charges or cash deposit fees. A minimum balance of R30 is required.

The FNB Fluid account, a transaction account designed specifically for 13- to 18-year-olds, it can be used at retailers nationwide as an alternative to cash. There's no chance of getting into debt, as you can't make transactions if funds aren't available.

Nedbank offers Nedsave for youngsters up to 18, which requires a minimum balance of R10;

Standard Bank's (sum)1 Account is open to children up to the age of 19, or. scholars up to the age of 21. The account also has a savings pocket that earns interest

Accountable kids
What should you watch out for when giving your children financial responsibility?

Supervise your kids in setting financial goals, with saving and budget planning getting priority.

Inform them about the various transaction methods and the security risks involved.

Warn them not to divulge their personal identification number (PIN) and encourage them to take responsibility for account ownership.

Ensure they understand the consequences of getting into debt.

Teach your children cost-effective ATM usage. Use the ATM of your own bank to avoid Saswitch charges and limit ATM usage, as each transaction costs money.

Kid power!
Darrel Orsmond, director of Nedbank's retail transaction products, offers some tips on how to empower your kids:

Allow your children to make their own buying and saving decisions.

Set pocket money allowances that both you and your child agree on and be very strict about not dishing out extra cash.

Pay your children's pocket money directly from your account into theirs, which they can access using their ATM card.

Encourage them to save and invest, and follow a savings culture within your family.

Read financial material together and explain to your kids what the articles are about and ask for their opinions and views on financial matters.

Explain some of the following banking principles and basic banking transactions: debit orders; stop orders; debit cards and debit card transactions at point-of-sale; how to make cash and cheque deposits; various ways to withdraw money; ATM cards and PINs; pricing awareness and the best way to minimise bank costs; safety and security of transacting at ATMs and point-of-sale; and the importance of credit records. (Plenty of reading material is available on these services and transactions from banks in the form of brochures and on websites.)