Step 1: What does your child do to earn the money?
Set up a series of chores and expectations. These should be measurable. For example, I expect your bed to be made everyday, wash the dishes once a week, and pack your ironed clothes in your cupboard every Sunday. Perhaps I also expect you to feed the animals daily and to maintain a C average at school.
All these are measurable. Deduct money for every chore not done and each expectation not met. This way, children learn to work for what they earn rather than just getting money for nothing. Out there in the real world the motto goes: “Nothing for nothing and very little for 10 cents”.
Step 2: Decide what you expect you child to be paying for.
This should include all social excursions, airtime for their telephone, luxury clothing purchases, birthday presents for friends and any special things they want. Also ensure it includes tuck shop money and sweet money (no more paying for sweets at the shop on the way home from work). Most parents say that alone saved them thousands.
Airtime:
Be conservative, remember there are social networks which cost very little like Mxit and facebook so communication should not be very expensive. A “please call me” can still be used if they want to speak to you.
Outings:
Remember don’t allow them to go to too many outing, no more than 1 per weekend and preferably ensure at least 1 weekend has a social outing that either does not cost money or forces them to stay home and enjoy some quality family time. Birthday presents for friends would fall in here.
Luxury Purchases:
These items should be saved for, rather give them less and get them to save for 2 or 3 months to buy that special shirt or fancy handbag. Buying what you want when you see it does not teach your child the value of money.
Tuck shop:
Tuck shop money should be for 1 day per week at most. Sandwiches and a fruit for school will be sufficient and you can add making it to their chore list and save yourself the time.
Sweets:
Be Smart, 1 sweet a week over and above tuck shop is more than enough. You don’t have to spoil your children, you may even find they would rather not have a sweet anyway if they have to pay for it themselves.
Example Budget:
Airtime per month: R 30.00
Social outings per month: R 200.00
Luxury purchases: R 100.00
Tuck shop money: R 40.00
Sweets: R 30.00
Saving(20%): R 100.00 (see previous post)
Total Pocket money: R 500.00
You need to calculate a budget before you decide on the amount you want to give them according to your means and their current lifestyle. You can only introduce this plan to your child once you are familiar and comfortable with it. If you have not decided, they will convince you they need more and you will end up paying it!
Wednesday, September 16, 2009
Thursday, August 27, 2009
Convince your kids to save money
I tell my children they have to save 20% of their pocket money while living at home. They should save this high % because they will never again get the opportunity to save this easily and probably not at this high % once they have to pay rent or a bond and the other expenses that adults have to.
How do I convince them to do this?
Incentive: To encourage saving I give them an incentive.
The scheme works like this:
My child earns R300.00 per month pocket money. They have to save 20%, that is R60 per month every month. I open a savings account at my local bank and deposit the R60 every month into that account and give my child the R240 balance as his pocket money. At the end of the year, my child has saved R60 per month for 12 months, a total of R720. According to the incentive scheme I must give my child 50% of their savings, that is R360.00. My child now has a total saving of R 1080, add the interest they earn from the bank and your child has saved approximately R 1100 in only 1 year from a pocket money of only R300 per month.
The first year is the hardest, but you as the parent should withhold their saving portion and deposit it for them. Once your child has received their first years saving bonus an addiction starts building.
This addiction grows stronger every year. Start saving from a young age, and what is learned from childhood, will become normal adult behaviour. Try encouraging them to spend only 50% of the saved amount on something special at the end of the year and save the other 50% towards next year. As the amount grows exponentially, because it will, they feel more proud of themselves and want to save more and more.
You must keep in mind that you are still the adult and that you should still be controlling where their saved money is kept and how much interest they earn while trying to maximise their gains.
Start out with a savings account at your local bank. When the savings reach R5000 start looking for alternative places to keep their money. Compare investments and pick the investment that earns the highest interest rate but is still a low risk product. Unit trusts, investment policies and fixed deposits pay a higher interest rate than an ordinary savings account and are all good options.
Remember to keep a balance in their savings account for their 50% spend at the end of the year as it can be tricky and costly to move money from higher interest rate accounts for short to medium term spending.
How do I convince them to do this?
Incentive: To encourage saving I give them an incentive.
The scheme works like this:
My child earns R300.00 per month pocket money. They have to save 20%, that is R60 per month every month. I open a savings account at my local bank and deposit the R60 every month into that account and give my child the R240 balance as his pocket money. At the end of the year, my child has saved R60 per month for 12 months, a total of R720. According to the incentive scheme I must give my child 50% of their savings, that is R360.00. My child now has a total saving of R 1080, add the interest they earn from the bank and your child has saved approximately R 1100 in only 1 year from a pocket money of only R300 per month.
The first year is the hardest, but you as the parent should withhold their saving portion and deposit it for them. Once your child has received their first years saving bonus an addiction starts building.
This addiction grows stronger every year. Start saving from a young age, and what is learned from childhood, will become normal adult behaviour. Try encouraging them to spend only 50% of the saved amount on something special at the end of the year and save the other 50% towards next year. As the amount grows exponentially, because it will, they feel more proud of themselves and want to save more and more.
You must keep in mind that you are still the adult and that you should still be controlling where their saved money is kept and how much interest they earn while trying to maximise their gains.
Start out with a savings account at your local bank. When the savings reach R5000 start looking for alternative places to keep their money. Compare investments and pick the investment that earns the highest interest rate but is still a low risk product. Unit trusts, investment policies and fixed deposits pay a higher interest rate than an ordinary savings account and are all good options.
Remember to keep a balance in their savings account for their 50% spend at the end of the year as it can be tricky and costly to move money from higher interest rate accounts for short to medium term spending.
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