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SIMON BROWN: I’m chatting now with Stian de Witt, executive head of financial planning at NMG Benefits. Stian, I appreciate the early morning. Kids are back at school for the 2024 year. One of the key things, though, is getting them smart around money. A recent note you put out said ‘start them early’. I suppose the first question is how early we should be engaging our young ones in money – in sort of the process of getting them smarter around money.
STIAN DE WITT: Yes. Good morning, Simon. Cambridge University brought out a study to say as young as the age of seven. But my golden rule is ‘the moment they can start to count to 10’. The moment they can count to 10 you can help them and help them to appropriate money in the proper way.
SIMON BROWN: And it’s small things. It’s not a case of necessarily putting them down with an Excel spreadsheet and start them balancing things. It’s just taking some of the arithmetic. You make the point that even helping calculate a tip at a restaurant kind of gets them involved in the whole process and thinking around money.
STIAN DE WITT: Yes. And there’s a really nice way of doing it, where you actually take three different colours of piggy banks, the way of a traffic light, a green, an amber and a red, and you allocate money. You say, listen, the green money is for the money that you want to spend, the red money is the money you want to give away, and the amber money is the money you want to save. You start allocating the money in those piggy banks as cash, and then you help them. That’s for young children, obviously, and things like helping them choose the groceries, looking at the groceries and seeing which ones are the most cost-effective.
SIMON BROWN: And what we’re talking about here is just getting them involved. I’m thinking a family budget – we are talking of kids older than seven, I would imagine. But if a budget’s been done, typically kids are kind of informed of what it is. There must be space to involve them in the process as they get older, sit them down, help them understand where the money’s coming from and going.
STIAN DE WITT: Yes. That’s also true. But I think it’s also important to help them have their own budgets, and say there’s a portion of money. I think one of the biggest mistakes that parents make is in creating a poor mentality, telling the kids, ‘listen, there’s no money for this’, instead of saying ‘it’s not in our budget’. It’s subtle things like that, but you’re creating a wealth mindset by helping your kids work on the budget and maybe allocate a portion of the budget of the household that they can manage on behalf of the household.
SIMON BROWN: I take your point on that as well. You talk around the three piggy banks, and I appreciate that as kids get older they might not actually be piggy banks any more. But one of those [principles] is around you’ve got that third to spend – how do you spend it? Don’t blow it all on payday.
STIAN DE WITT: Yes, it comes back to your budget. Even as an adult, when you look at your budget, you always say you have your obligations, you have your needs and you have your wants, and you start breaking that down. As you grow older, it doesn’t matter, it doesn’t help if you spend money on restaurants or entertainment but you haven’t paid your rent or you haven’t paid your insurance or your car; then you’re going to lose those anyway.
SIMON BROWN: Then the setting of an example. I often make the point that when you look out at the wild world – for example, governments of the world over all borrow more than they earn, and that’s a terrible example. As parents, there’s a responsibility on you to do as you say, set that example for the kids.
STIAN DE WITT: Yes. I think that’s really, really important that we as parents need to set the example of how we handle money, the psychology behind money, how we talk about money and what we say to our kids. But yes, spending properly, appropriately.
Sometimes you come to a place where you say, ‘Oh my goodness, there’s not enough money this month so let’s get creative around it’, because sometimes life happens. It’s also important to talk to your kids about things like an emergency fund and how to deal with that.
SIMON BROWN: Yes, absolutely. And then the last point you made was, help your kids earn money, and that’s not sending them off to the sweat shop. I don’t know – if they’re young enough maybe they can wash cars or something. As they get older, they can go and work in restaurants perhaps as waiters or bus boys or girls. But it is getting them involved in that side hustle and the [reality] that money just doesn’t fall out of the sky.
STIAN DE WITT: Yes. Simon actually, Harvard Grant did an interesting study that [spanned] 85 years, where they say that people or children who helped around the house – and you might want to pay your kids money for chores – [are] actually more successful. To your point, I think there’s two sides to it. Sometimes we have to go to our kids, [say] go and find a job, go and do something, do some chores or do something in the neighbourhood.
But at other times I think it’s really important for us to empower our children, to say, listen, you can have whatever you want to have; you must just go and make the money, go and earn it. Start with a side hustle, start with selling lemonade in the neighbourhood or start becoming an entrepreneur, because in South Africa those [are] people who really want to thrive in the future. I think we need to raise up more entrepreneurs to stimulate our economy, and that’s one of the ways we can practically do it in our households.
SIMON BROWN: I see that. I remember when I wanted a motorbike. My mother said ‘sure’ – and I was surprised; but then I realised she wasn’t paying for it. I had to go find the money. I did that. I absolutely went and got the money. I worked like crazy.
Stian de Witt, executive head of financial planning, NMG Benefits, I appreciate the early morning.
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