IT IS critically important for parents to teach their kids good money habits.
Lance Solms, managing director at Itransact, advises parents on how to improve their kids financial security.
Start early
As soon as your child gets their first pay cheque, they should seek a financial advisor to help with retirement planning.
Keep in mind that savings accumulate and the interest compounds without taxes, as long as the money is not withdrawn, so it’s wise to establish a retirement investment vehicle early in their working life.
Another reason to start saving early is that the younger they are, the less likely they are to have expensive financial obligations.
Be realistic
The time spent developing a budget is time well spent. A budget allows your kids to determine whether they have enough money to get what they would like to have. Many young people spend more than they make but, as Investor Warren Buffet said: “Spend after saving – don’t save after spending”.
Young people must be realistic about needs and wants.
Explain financial jargon
While financial education takes us closer to being responsible with money, it can be tricky to cut through the thick business jargon.
These terms and words can be intimidating and confusing which is why it is so important to understand them.
Avoid loans, save money and pay cash
As we all know, hitting a cashflow problem on borrowed money can land anyone in serious debt trouble. This is because, while savings accumulates interest slowly, debt accumulates quickly.
Teach your kids to avoid credit unless it is for a big purchase – for a house or vehicle.
They should save for everything else, especially for car or home loan deposits.
“By equipping your children with sound financial advice early on and building a strong foundation, you are not only securing a sound financial future for them but also eliminating possible future financial burdens.”
