Savings is crucial for South African consumers – and it’s best to do so as young as possible. <\/p>\n\n\n\n
With their whole lives ahead of them, children have the benefit of time to build up savings and set themselves up for the future. <\/p>\n\n\n\n
However, children do not know how to save, so teaching them good habits can help them for the rest of their lives, Investec’s Ren\u00e9 Grobler said. <\/p>\n\n\n\n
Understanding money <\/strong><\/p>\n\n\n\n Grobler said that parents should have a conversation with their children about the purpose of money, i.e. spending it on things. <\/p>\n\n\n\n The conversation should also consider spending money wisely and understanding the difference between instant and delayed gratification – or paying yourself first (saving) vs paying others (spending). <\/p>\n\n\n\n \u201c[It\u2019s about] people and kids especially, understanding that, even if I don’t get the satisfaction now, I’m paying myself first,\u201d she said.<\/p>\n\n\n\n The time value <\/strong><\/p>\n\n\n\n Inflation erodes the value of money; however, growing the money is still possible if the “magic of compounding” is used. <\/p>\n\n\n\n For instance, opening an interest-bearing savings account will show the child how their money grows. <\/p>\n\n\n\n \u201cSo if a child had R100 pocket money that they put away at the end of the month and they left it in the bank at a 7% interest rate at the end of the year, they would have R107 in their bank account. So if you have R107 at the end of the year and earn another 7% on top of that, the interest you earn in the second year will be higher than the interest in the first year,\u201d said Grobler.<\/p>\n\n\n\n