Mastering money management — a parent’s guide to raising financially savvy young adults

South Africa faces significant financial literacy challenges, particularly among its youth. To address this, experts emphasise the importance of educating young adults on effective money management. Recently, Thabo Qoako, a consumer financial education specialist at Momentum Group Foundation, chatted to personal finance editor Neesa Moodley at a Daily Maverick live journalism webinar about the significant role parents face when it comes to helping their teen and adult children master money management.

Read more: Young South African adults are spending for today and not saving for tomorrow

The 2024 Generational Wealth Youth Survey by 1Life Insurance reveals that South African youth face significant financial challenges. Amid a 45.5% youth unemployment rate, more than 50% of employed youth lack knowledge on financial stability, and fewer than 30% have a reliable monthly budget, highlighting a critical need for improved financial literacy.

Qoako highlighted that parents are key to instilling responsible financial habits in their children, particularly as they transition into tertiary education when they may leave the nest or join the workforce. 

As a starting point, Qoako stated that: “Whether you have just started receiving funding from a programme like the National Student Financial Aid Scheme or you have just started earning an income, you need to start with an understanding of the concept of budgeting.”

Setting a budget could vary widely between families depending on their income and where the child is in their life journey. 

“For example, if your child has just started their first job and is still living at home, you could ask them to contribute towards rent and groceries as a starting point.

“If the child is staying in residence on campus, then you need to help them draw up a monthly or weekly budget so they don’t run short of money during the month. A good starting point would be to draw up a budget for your student child and say — this is how much I can afford to give you each month for groceries. Then break it down into a weekly budget. You could go one step further and help them work out a meal plan so it’s easier to resist the temptation of spending their money on takeaways every day,” Moodley said.

 Qoako advised parents to reinforce the importance of setting financial goals.

“As a parent, you can teach your kids about the importance of financial goals. Budgeting helps them understand where their money is going, what their current priorities should be. A 50/30/20 budget is a great start. The idea is that 50% of your budget goes towards necessities such as rent, transport and groceries; 30% goes towards your wants such as subscriptions, eating out, and 20% goes towards your savings and any debt repayments,” he said.

Read more: Tips to manage money wisely from your very first paycheque

However, budgeting can seem abstract until you are faced with real-world expenses. Moodley suggested using practical examples to show young adults exactly how quickly income gets distributed and dwindles. 

“If you’re not comfortable sharing your own income, you could use a ballpark figure such as R20,000 as an example of a salary, and then show your child how a budget works with actual rand amounts. For example, R20,000 a month may sound like a lot of money to a 23-year old, but then break it down further. Work out how much their tax deductions will be, then deduct the money for their group retirement fund and medical scheme contribution. Assume they want to rent a flat for R5,000 a month. Now look at what’s left for groceries, transport and possibly going out with friends. Suddenly that R20,000 that seemed like a lot — is actually a lot less,” she cautioned.  

For Gen Zs who are so tech-savvy, apps or spreadsheets can also play a big role when it comes to tracking expenses and maintaining financial awareness. 

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