In one article we emphasised that an entrepreneur is not solely born but that some abilities and skills are developed through life experiences. In this article we focus on the concept of financial literacy and the need to develop the attitude from a young age. Upholding this attitude can be key for entrepreneur wannabees.

According to Investopedia site, financial literacy is the understanding of various financial areas relating to investing and budgeting. The focus is on the ability to manage personal finance matters in an efficient manner. Financial literacy knows neither age nor socioeconomic background. From an early age a child can be made aware of the value of money and the importance of spending it wisely.

Parents today give allowances their 5-year olds. From this the child is expected to pay rent and for utilities, a portion is for their school lunch while the remainder is given to the parent to save on the child’s behalf. The focus is not on the amount of the stipend but rather what the money is spent on and accountability.

Let us explore the fundamentals of financial literacy, one of which is a budget. In simple terms, a budget shows cash inflow and outflow for a particular period, be it a month, a year or five-year plan. The challenge in preparing a budget is that the expected inflow is usually fixed while some of the expenses are non-controllable, for example food. And more often than not, total expenditure exceeds income. It is important that a budget is prepared literally on paper so that all items of expenditure are visible and can get ranked in order of priority.

Debt management is another vital factor since lack of it can result in legal suits and tarnish reputations. From the acquisition of debt, affordability should be ascertained and thereafter instalments made due at the agreed times. Making payments when due not only uplifts healthy relationships between the borrower and the lender; it promotes the possibility of future lending arrangements.

Having a portion of income directed at savings is another depiction of financial literacy. Savings can be for a particular cause or for purposes of having backup resources upon unforeseeable times of need. Even the traditional metshelo arrangements are a form of monthly savings to avail money for food or school fees at year-end. Alternatively money saved can later be invested in long term projects such as real estate.

We explore Sigmund Freud’s five stages of personality development and what parents can do at each stage to develop the skills of their children.

Oral Stage (0-1.5 years)


During this stage, trust in children is based on whether their oral needs are met, e.g. being fed. If not met when they cry, they learn to mistrust. Teaching your child to trust by meeting their oral needs allows other people to trust them, thus creating a conducive environment for other people to do business with them. Ever heard the saying, “If people like you, they’ll listen to you, but if they trust you, they’ll do business with you?”


Potty training stage (1.5-3 years)


During this stage, a child is taught bladder and bowel control. The manner in which parents address this stage plays a huge part in how a child feels about it. If a parent is supportive and gives the child space, it builds up their confidence and allows them to be independent. However, if a parent is strict and overprotective, the child will have some self-doubt. Independence is an important trait that an entrepreneur requires in order to succeed. They will be able to explore and take calculated risks.


Phallic (3-5 years)


In this phase a child develops feelings and learns to do things on their own. It is therefore vital that at this stage parents encourage their children as they build their character. Parents must steer children into a direction of seeing opportunities and initiating actions.


Latency age (5-12 years)


At this stage a child can reason with rationality. They would have learnt to trust, be independent and do things on their own from the previous stages. Parents must therefore teach their children to become financially literate and be responsible as outlined above. If the child enjoys cooking, parents could participate and teach them to put their skill to good use by making diphaphatha/hot dogs/pizzas/sandwiches and selling them to their friends/neighbours in order to create income from a young age.


Adolescence (12-adulthood)


This is a stage of transition from childhood to adulthood and is a period filled with confusion. Children therefore require the guidance of their parents in order to equip them for adulthood. At the same time, direction is given to sharpen the skills developed during the latency stage. At this stage a child has developed the vision to recognise opportunity and willingness to take calculated risks. It is now the time to teach them to formulate business plans and put together an effective team and resources to implement their plans.


Basic financial literacy starts with acknowledging one’s financial position and efficiently allocating resources. One can then look into how to expand one’s income or where to channel extra funds. Advanced financial literacy may call for research into current trends, networking and understanding what others are doing, as well as learning concepts such as tax and retirement planning. Parents therefore need to be aware of what children learn at each stage of their personality development so as to be able to equip them with knowledge and the encouragement they require to become successful entrepreneurs from a young age.