In episode 14 of the Change in your Pocket series, we examine how best to go about discussing money with young children.

– Video supplied by BrightRock

Welcome to The Change Exchange where we’re exploring ways to raise a financially savvy child.

While we all want financially savvy children, we also need to be very careful about how we talk to our children about money so that we don’t instil fear in them. I realised this when my son, aged six at the time, burst into tears because he thought we were poor and we were going to have to live out of a car! My husband was in between jobs at the time and we were about to move from Johannesburg to Cape Town. It was a financially tight time and we had to cut back on luxuries, including extra murals at school. The fact that I kept wandering around saying “we can’t afford this” or “we don’t have money for that”, combined with selling our home in Johannesburg, had created a whole story in his head that we were poor and would have nowhere to live.

So I sat down and explained how our family’s finances work. I told him that even though dad did not bring in a salary for a few months, we had a pile of money saved up and this money meant we were not poor; it also meant that mom and dad would be able to stop working one day, when we got older.

Then, using a wad of Monopoly money, I showed him how some money is used for day-to-day stuff like paying for the house, food, clothes, petrol and some nice things like treats and small gifts. Some is added to our pile of money for when we are older or if we don’t have a job, and some is then used to save for family holidays and presents and Christmas.

When we don’t have money for toys, I mean that this little pile for our everyday shopping has run out. I don’t want to take money from the pile that we are using to save for important things.

What I learned that day was never to tell your kids you don’t have money. Rather say you don’t want to spend money on that particular item, as you are putting money away for other things.

Also, get your own finances in order so that you can show your children that you are making provision for the future – it will make them feel safer. If you can’t afford to buy something that they want, encourage them to save up for it themselves, and don’t be afraid to discuss money, budgeting and saving with your children.