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By René Roux, 19 June 2019
By equipping girls at a young age with the knowledge to make smarter financial decisions and display positive financial behavior, they may be better able to protect their income and assets, grow their wealth, and avoid or manage debt later in life.
Furthermore, because women who earn and save may typically be better positioned to educate their own children, save for retirement, and become active consumers, it stands to reason that they have greater potential to positively contribute to the country’s GDP, reduce the strain on government to provide social grants, and play a small part in breaking the cycle of poverty. Financial literacy should be a focus area throughout the year, particularly in light of the fact that South Africa recently came last in a poll of 30 countries and economies, according to the 2016 OECD/INFE International Survey of Adult Financial Literacy Competencies. However, the upcoming Women’s Month provides an added opportunity to highlight the issues, and share insights to work towards sustainable change.
Let’s discuss some practical ways parents can begin to introduce basic financial concepts to their kids, including their daughters – and get the process started one small step at a time.
Many of the perceptions, skills and attitudes children have about money are learnt in the home. Children tend to mimic the behaviour of others, so parents need to carefully consider how their own financial behaviour and attitudes will influence their daughters. To raise financially responsible daughters, parents should themselves make financially responsible decisions and help children understand the reasons for, and against, these decisions.
Children should be taught how to differentiate between a need and want, how to appreciate the value of money by having opportunities to ‘work’ and save, and how to make adjustments when necessary – and parents play a key role in imparting this knowledge. By understanding the difference between and a want, they are able to better prioritise their spending in terms of which expenses need to be taken care of immediately, and which can wait until later.
Some parents may not necessarily agree with the idea of paying kids for chores that they should be doing anyway, like packing away their toys or making up their bed – which is understandable. However, there may be extra chores to teach them the concept of earning money in exchange for a task done. If extra chores are incentivised with cash, they could learn to become more resourceful – a skill that could stand your daughters in good stead throughout life.
Once you and your daughter have a good idea of how much they earn during a week or month, help them create a budget. This is particularly relevant for girls who are a little older. The budget should be collaboratively drawn up as a fun and exciting exercise. This can be done in a very visual and simplistic way that’s easy to understand. This is where there understanding of a need and want becomes practical. Together, track this budget and where there are variations, talk to your daughter about adjustments she can make to get back on track, or how she can go about earning extra money to cover the shortfalls.
Help your daughter understand the importance of saving first, and spending later. Inculcate a habit of first setting aside an amount for a future goal, and only then taking care of immediate needs. An important lesson to teach them is that of patience, as opposed to instant gratification. When your daughter wants something she can’t afford, encourage her to save for it. Do the math with her, and show her that by saving larger amounts, she may be able to afford the item sooner, and vice versa. There are many fun engaging ways to encourage your daughters to save money – especially by making the exercises very visually driven. When they are very young, you could give them a transparent money box so they can see the coins accumulating. You could even stick a picture of the item they’re saving for on the money box. As they get older, open a bank account or unit trust in their name deposit their money into the account. Introduce your daughter to internet banking so she is able to transact online and monitor her own spending easily.
There are many useful resources that explain the benefits of starting to invest early in life, and in particular the benefits of compound interest over time. Often we hear about the frightening statistic that 94% of South Africans will not be able to afford to retire comfortably. The most effective way for your daughter to work towards being part of the 6% that will be, is to save a suitable amount consistently over time, and to start early.
Some of the most profound gifts parents can give their daughters are those of peace of mind, opportunity and confidence. With the right knowledge and skills, girls are better empowered to be self-sufficient and thrive whether or not they are on their own.