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Children pay for their parents' bad financial habits
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- The bad financial habits of many parents are often reflected in their children
- It is a cycle that must be broken
Bruce Cameron is an award-winning journalist and co-author, with Wouter Fourie, of the best-selling books, 'The Ultimate Guide to Retirement in South Africa'; and recently published, 'Secure Your Retirement: How to Beat the Effects of Corruption, Ratings Downgrades and Economic Lockdowns'.
He recently published the article below on Fin24 (South Africa’s largest source of business, financial and economic news) on the bad financial habits of many parents that are often reflected in their children, and that the cycle must be broken.
Children, who grow up with parents who put no limit of debt, spend everything they have plus more, leaving unpaid bills and never budget are simply likely to repeat the process.
Fortunately, there are people out there who are trying to intervene to influence children to behave properly, and in the process also help influence their parents.
Playing a high-level role is the regulator, the Financial Service Conduct Authority, which is conducting for the fourth time a national school competition.
In July every year the South African Savings Institute has a Savings Month to encourage sound financial planning. A major part of this campaign is aimed at schools with many financial planners lecturing on the subject.
Recently Kobus Kleyn, a Certified Financial Planner (CFP) accredited the Financial Planning Institute, put out a challenge on LinkedIn challenging other financial planners to state what is the best way to tackle financial illiteracy. The dominating factor was the education of children.
Ask anyone who has a financially secure retirement, particularly those who were employee members of funds: how did the make it? In simple terms they will reply:
Granted there are people who are hit by the misfortunes of life, such as the devastating impact of Covid-19 with accompanying cuts in pay, or losing their jobs. But this is no reason why there are less then 6% of retirement fund members who are financially secure when they retire.
The main reason is they saw their retirement savings as an extra source of income before they reached retirement. And that is apart from other bad financial habits.
How would you react, as a parent or grandparent, if you were told that there is a competition currently open to school children with the following prizes:
- I kept debt to the minimum, only borrowing for such things as a home;
- I never spent more than I earned;
- I saved every month;
- I never withdrew cash from my retirement fund;
- I built up an emergency fund; and,
- I had patience (compounding returns will do the rest).
For each of the nine provinces: First place R30 000, R15 000 for second place and R7 500 for third place.
At the national finals, a further R30 000 for first place followed by R15 000 and R7 500.
And most important, three full bursaries, including tertiary education, will be made available.
Behind these mouth-watering prizes is the FSCA Consumer Education Department being funded by the FSCA Consumer Education Foundation, with support from the Financial Planning Institute and the Department of Basic Education and provincial education departments.
The competition targets Grade 11 leaners from quintile 1 to 3 schools majoring in business studies, economics and accounting subjects. Learners start competing at classroom level and then progress through the district and provincial rounds with the provincial winners competing at the national level.
The learners must research a topic, synthesise the research intelligibly and then do a five-minute presentation that must be digitally-recorded.
Topics include financial planning, consumer protection, rights and responsibilities, starting a business, or engaging with financial service providers.
Although the prizes are exciting, I would suggest that every learner who takes part will learn from this experience – and it will help stop passing on the bad habits of parents.
It may also be helpful, for particularly grandparents, to set up for each of their grandchildren a savings account or unit trust account to help pay for tertiary education. At the same time, they should also teach their grandchildren about compounding returns, budgets, and bad spending.
Another idea is for financial planners to involve children when they advise their parents. They should have an interactive education structure for children including setting up savings accounts, with attention on the tax-free savings account.
The use of an account will help a lot with education.
Colin Stevens, FSCA consumer education specialist, says schools who have not done so need to get in their entries urgently.
He expects entries from more than 5 000 learners from about 500 schools.
In the first-round, teachers will identify school winners. The teachers will then digitally upload that presentation to: www.fscaspeechcomp.co.za. From there FSCA-appointed judges and the provincial education departments will complete the further stages of the competition.
It could be helpful if groups of parents or sponsors could put together prizes or bursaries at the lower school levels of the competition to encourage learners.
The competition was first held four years ago as an experiment at 150 Gauteng schools. Last year the competition was cancelled because of Covid-19. Now it is a national event.
Each school must sign up urgently on www.fscaspeechcomp.co.za.
The competition will run until 22 February when the final winners will be announced.
This is a competition with real benefits in every way, from the prizes to teaching children (and indirectly parents) about why good financial habits should be mantra of every South African.
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