With living expenses rising due to inflation and disruptive loadshedding schedules that have their own financial implications, saving is becoming increasingly difficult for consumers.
But, as the rule of thumb goes – 20 percent of your income should do the trick.
If you have a little one, including them in the good money practices is a good idea as they would grow up with a saving mentality.
“It all starts with the awareness of money and savings from a young age,” says Charlotte Nsubuga-Mukasa, head of marketing at Momentum.
“There are many lessons to be learned and some may come with tears,” she adds.
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Saving right now is not a priority for many South Africans.
According to the Wonga Money Academy, South Africa’s household saving rate was at 0.3 percent in the first quarter of 2022, which is a decrease from the fourth quarter of 2021.
Charlotte shares the following tips to use as teaching moments to build confidence, ambition and informed decision-making for life:
1. Discuss money with a warm intention
Most children start to form thoughts, feelings, and opinions about money from watching their parents. In my case, it has started far sooner thnt what I would have liked with my seven-year-old son.
Life is not perfect, but he came into my life when my pocket was stretched, so his association with money is linked to seeing me worried and deep in thought.
However, I am now intentional about discussing money, and I look for opportunities to explain what money is and how it works. For now, his concept of a R400 bill of groceries vs. R400 000 car, are pretty much the same thing.
But I never lose an opportunity to expand on the art of budgeting, and how to recognize ‘wants versus needs’.
2. Teach kids the value of making money
When your kids are old enough, shift the goal from household chores to a part-time job or encourage a small business idea. You will quickly pick up your child’s natural preference in no time.
The objective is for them to have their own money and the opportunity to make decisions on how to manage it. More importantly, this new cash flow will show them how a budget works in action.
3. Zone in on the benefits of saving for that toy
Learning how to save is one of the most important lessons your kids will ever learn about money. It is never too early or too late to save. Starting with a plan and latching onto savings advice will float most households that have the means to eat and earn.
The discipline of a planned budget is that you have to spend less than you earn - while being smart with your savings pocket. It’s the quickest way to get to financial success, and anyone can start.
I say use your momentum to allocate most of your money into three buckets: spending, saving, and giving. A giving nation that is steered well, stays generous on addressing poverty, unemployment, infrastructure and overall financial wellness.
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4. Make opening and managing a bank account fun and games
I got my first bank account in primary school from my dad. When I look back now, it should have been shrouded in a good dinner or the cutting of a cake somehow. It shaped my first memory of how it feels to be grown and responsible.
My bank account had very little in it for many years, but it soon transitioned into where I deposited my savings from my summer job as a waitress in university, as well as my first job.
When opening a bank account for your kid - make sure to read the brochure with them to kick start the process. Dress up to sign the necessary papers when you visit the branch, highlight the annual percentage rate on their savings portion, when you review their first statement, discuss the charges as their accounts change over time.
All these money moves will be extremely exciting, and they prepare them for more advanced concepts such as the time value of money, compound interest and investing when they become teens or young adults.
In the case of kids, luckily most bank accounts, charge nothing to very little, a move that I am sure is weaved into society to build a healthy savings culture in South Africa.
5. Teen talk: Discuss long-term investing over dinner and the news
Opening an investment account for your child can be so overwhelming. In truth, I am not sure when I will start myself. I am grappling with the inherent risk of the stock market crashing my child’s self-esteem.
However, I do know that money that is not needed in the short-term, has the potential to earn significantly more than a savings account over time.
When you are ready, have a coffee with your financial adviser, to ask their advice about how you can get your kids to research more conservative investments such as bonds or money market funds to encourage interest and action with a small amount.
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