My early relationship with money was highly influenced by watching how my parents handled it.
My parents were divorced before I even realised there were two of them. My mother was a nurse, my father an aeronautical electrician. They had very different views on money and how to spend it. My mother was always counting (and stretching) her pennies. My father earned more; money never seemed an issue when I visited him. It was only when I reached adulthood that I realised who managed their money more effectively.
Because money wasn’t a topic of discussion, I ended up learning the hard way. Now a parent myself, I seem to be making similar mistakes, albeit in a slightly different guise; I save like my mother but spend on my son like my father did on me.
But this is not the approach to money I want to pass on to my son. Below are five lessons I want him to learn now. These are age appropriate (my son is 17 years-old), so adapt them as necessary when discussing them with your own kids.
1. Show them money: I plan on telling my son how much I earn, and then giving him a list of our monthly expenses to sum. This will expose him to the often-unseen costs that make our lifestyle possible. Educating him on each line item and its purpose will be a focus. Once he has the figures for both our income and expenses, I plan to set him the task of calculating what’s left over, and how much that leaves us with to spend each day until month end.
2. Emergency fund: Life doesn’t progress in a straight line — it weaves. I would like my son to understand that having an income is not always guaranteed. Consequently, having an emergency fund is prudent. Tying in with the first point, my son will be tasked with how to fund this fallback mechanism, using our current income and expenses as inputs. How could we earn more, or what expenses could be reduced to put this safety net in place? Letting him scrutinise our spending for necessity versus luxury items sounds like a good place to start.
3. Good versus bad debt: I’ll be listing all the mainstream types of debt: mortgage, car, credit card, store cards. Then we’ll explore which are necessary and which are not and why. I plan to raise questions around whether you should spend money you don’t have (credit/store cards), and what the potential repercussions of doing so are. My aim is to give him a very clear understanding of which debt he should avoid, and which can be used to effectively build wealth.
4. Earning money: I would like my son to know how I earn money on a more granular level. Given my total salary, how much do I earn per hour? What are my deliverables at work that I get paid for? What constitutes a job well done? What would I need to do to increase my current salary? What parts of my work do I love, which ones am I looking to move away from? Once I’ve run though how the questions apply to me, I will ask him to do the same for his chores and the money he earns from them.
5. Saving: My son earns pocket money for his chores. Instead of his earnings floating around in a wallet or makeshift piggy bank, I plan on helping him open a bank account. In having his own account he’ll get a more holistic view of what it means to manage money. If he wants to buy something, he must research the cost and then reconcile that with his balance to see if he can afford it. And if he can’t afford it, he’ll need to explore how can he save or earn more to reach his goal. Routinely examining his monthly statement to see how he’s spending his money is an outcome I’ll target.
Teaching these lessons to my son is going to require consistency on my behalf. I can’t pay him R200 to wash my car when I know I can get it done at the car wash for R100. I also need to be aware of my own behaviour with money, and strive to set an example that adheres to the lessons above. It would also be unrealistic to expect him to get everything right the first time around; he will need me to guide and remind him about the importance of developing a healthy relationship with money.
At the heart of these lessons is the simple idea that money should never be a taboo subject between my son and I. I hope that by being open and honest with him about our financial situation, I will be able to give him the knowledge that will help him avoid the mistakes I’ve already made.
Interested in more of Evelyn's articles? Read her informative piece on how to future proofing your finances in 5 steps