TEACH KIDS YOUNG TO STOP THE DEBT CYCLE
Wednesday, February 15, 2012
As a staggering number of South Africans thrash in suffocating debt, Budget Insurance Brokers is highlighting the pressing need for parents to start teaching their kids early about money and how to manage it.
“Start teaching your children about managing money from a young age. They are ready to start learning basic concepts from when they start counting, and if you haven’t started teaching them by the time they’re nagging you for unnecessary items that you actually can’t afford to buy, you better start quick,” says Telesure MD, Thomas Creamer.
“We live in an era of instant gratification, when paying for something is as easy as whipping out a plastic card and money is ‘intangible’ yet seemingly always available. Children see this, and they learn from us. Unless we teach them otherwise, we’re only showing them how to enter the vicious cycle of debt that so many South African families are currently trapped in.”
And, more and more South African households are getting trapped.
The Consumer Debt Report complied in 2011 by Credit Matters, one of the largest debt counselling companies in South Africa, revealed that on average, South Africans use about 75% of their salaries to service debt.
It also showed that more than 9.8 million people have bad credit records, with accounts three or more months in arrears. Household debt is hovering at R1.2-trillion, up from R952-billion in 2008. The report is based on interviews with financial industry experts, debt counsellors, and information from Statistics SA and the National Credit Regulator (NCR).
With debt being a common way in which to live, Creamer says parents should make sure their children have an accurate, realistic perception of money and set them on the right path before they end up as part of the country’s debt statistics.
Ideally, parents should teach by example. If parents are prudent and responsible with money, their children are more likely to be as well. One of the hardest lessons to demonstrate to a child is that money is limited, or that, as the old adage goes, “money doesn’t grow on trees”.
“When they see you approach an ATM, put in a card and be presented with money, or hand a cashier a card and walk away with goods, it is difficult for a child to grasp that these cards merely provide access to a limited stash of money. Explain the process and make sure they understand that you can only pay for things if you have the money available.
“Saying ‘no’ to unjustifiable requests for money or items is a good way to demonstrate that the supply of money isn’t infinite. Also, ensure that they understand the difference between wants and needs to prepare them for making sensible spending decisions,” says Creamer.
Thomas Creamer offers this advice for raising money-smart children: