How to teach your child about money


Raising a child includes teaching them how to behave in social situations, the correct etiquette, and of course, providing them with access to education. However, many parents stop short of teaching their children how to handle finances and more specifically, how to save. Himal Parbhoo, CEO of FNB Cash Investments for Retail, says the best time to start talking to children about money is as soon as they can count and understand the concept of money.

Groceries can be a starting point
“The easiest way is to include them in discussions. A great place to start is your regular grocery shopping. Even a grade one or two child can be made aware of the price difference between buying two different chocolate bars. You can tailor this lesson to the child’s age. Senior primary children can take charge of the grocery list and learn how to select items while adding up the costs. They can cross-check at the till point to see how accurate their addition was. It’s surprising how quickly things add up once you start keeping track this way,” he says.

An older, secondary school child can be given a budget to carry out the grocery shopping and then tasked with making sure that they select the items on the grocery list while staying within the given budget. “This can also help with the habit children have of putting things in the trolley that are not on the list,” Parbhoo notes.

Lead by example
Society has changed significantly over the past 50 years. Notably, the topic of money in the household is no longer taboo. Encouraging your children to ask questions will allow them to see you making financial choices. If you need to buy a car, include them in the details of your decision-making process. Everything from what you need to buy a car, how much of a deposit you choose to put down and what factors go into choosing a car that is appropriately priced for you – these are all valuable financial life lessons that your child will carry forward when they need to buy a car one day.

Reward a savings mindset
In an instant gratification society, the concept of saving and being rewarded by earning interest on your money may seem difficult to communicate to a child. However, it doesn’t have to be complicated. In the sixties, a psychology professor (Walter Mischel) introduced the marshmallow experiment. Children between the ages of three and five were left alone in a room with two marshmallows. Each child was told that they could eat one marshmallow immediately, but if they were able to wait until an adult returned to the room, they could have both marshmallows.

Follow up research in their adulthood showed that children who were able to delay gratification performed better in high school and were later able to incorporate a savings mindset when managing their money. The ones who ate the first marshmallow and were unable to wait, grew up to become adults with poor weight management and poor financial skills.

You can teach your children about the concept of interest using their pocket money or allowance. “For example, if they spend their allowance immediately, it’s gone. You can tell them that if they save it for a month, you will pay them a small form of interest. The amounts would be discretionary according to your household budget, but this means you can encourage them to save their money with a little reward,” Parbhoo explains.

Talk to them about budgets
Too many parents often fob their children’s demands off with a simple “We can’t afford it”. “This may be true, but it would be more beneficial to sit your child down and explain to them what a budget is. Teach them to live within their means by showing them how to draw up a budget and that expenses should never exceed your income,” Parbhoo says. He notes that a child who has been taught how to budget as well as the value of saving is less likely to demand big-ticket purchases impulsively.

Use their allowance to teach them money management
“While conversation and education about money is vital, practical application of these skills also plays a big role when teaching your children how to save. For example, you can give them an allowance to buy their snacks for each week. Encourage them to become aware of the costs of each item, planning their snacks for the week and ensuring those snacks last the whole week,” he says. They will quickly learn how to manage a budget as well as differentiating between needs and wants.

Introduce financial literacy concepts at a young age
Variations of the above meme have been circulating for years and while we laugh, there is  truth to this. While the explanation of taxes may best be left for later years (it is actually included in the syllabus for Consumer Studies at high school level), there is nothing stopping you from introducing basic financial concepts at a young age. “In addition to budgets and interest, you can talk to your kids about the importance of saving for retirement, the purpose of life insurance, the value of short-term insurance and even inflation,” Parbhoo concludes.


  • Include your children in the financial aspect of planning their birthday party.
  • Take them along on grocery shopping trips and get them involved.
  • Allow them the freedom to manage their allowances. Sometimes they will get it wrong, but that’s how they will learn.
  • Encourage them to ask questions and dispel the idea that money is not to be discussed.
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