If the advent of Savings Month each July reminds you of how you struggle to put money aside for something you really want here are some useful tips from a 6-year-old.

Left in the hands of a child, life’s big problems are usually solved with a little common sense, a lot of determination and varying amounts of charm. The basics of saving and investing, like life, are not really that complicated. Many so-called grown-ups could learn a thing or two from this young Capetonian, Hugo the Boss (*not his real name).

On a family weekend away earlier this month, Hugo sold reconditioned second-hand toys and some original clay figurines at a village market. Hugo and his venture partner, 7-year-old Silas, a local in the village where they set up their business, had been researching the market for a year.

On the day in question the two boys had a clear strategy, a focused plan and a specific goal, which they achieved by the end of the day. 10X Investments is reliably told that this pattern of clear, systematic progress towards a goal is not unusual behaviour for Hugo.

“Hugo has always been a saver. He gets R30 a week as pocket money. He always puts R20 of that into his savings and spends the rest at the tuckshop.” This is a clear example of paying yourself first, which is what the experts advise. Warren Buffet famously said: “Do not save what is left after spending; instead spend what is left after saving.”

It has not been all plain-sailing for Hugo, who has suffered his share of setbacks. In fact, reliable sources confirm, his piggy bank has been stolen twice. The upside of that is that Hugo keeps his piggy bank in the safe now, which makes it easier to save.

When he had his piggybank in his room (it is alleged that) he often dipped in and took out a few coins to buy sweets.

Now that it is out of sight it is also, as the saying goes, out of mind. These days when Hugo wants to make an acquisition (or even just blow some cash) he pauses and thinks about it rather than just dipping into his funds.

At the moment he is saving for a drone, not just any drone, he knows to choose carefully and buy wisely. Hugo realised that he wasn’t going to be able to accumulate the capital required for the purchase of a good quality drone as long as he continued to rely on just the one revenue stream: pocket money.

He decided the time had come to diversify, which is how he came to set up his pop-up business at a village market. 10X Investments’sources confirmed that Hugo and Silas identified the business opportunity at the market more than a year before they set up the business. On a recent fact-finding mission the boys discovered that children could host stalls at the market for R10 (Table supplied).

After a period of brainstorming, strategising, raising seed capital etc Hugo and Silas decided the time was right to enter the market. They prepared for the first day’s trade by sorting through used toys and cleaning and reconditioning where required. Hugo decided to diversify a little by supplementing his inventory with clay figurines he has been making in his art class and prepared a selection of these for sale. He priced all the merchandise.

The big day came and it was a chilly start setting out the stall at 8am. Trade was slow to start and operational requirements (hot chocolate and pancakes) took their toll on cash flow. They realised that their location (tucked away far from anchor tenants and high turnover stalls in the market) was impacting trade.

Fortunately, having such a young team at the helm meant that they were able to be agile in their management style. Hugo and Silas made an executive decision to change tactics. They decided to position themselves as more of a niche, boutique-style offering and started approaching potential customers on a one-on-one basis with specific products.

The first deal was a big revenue earner for Silas (R200 for a Lego train set); Hugo had a slightly slower start with a R20 sale. Both fought off traders’ fatigue and stuck to their plan. Hugo’s brand started gaining traction and soon enough he had sold all seven clay figurines. Silas was also becoming quite the salesperson, offering demonstrations and pointing out all the great features of his products. Silas was soon the master of the upsell and few customers left with just one product.

With an hour to go before the closing bell a quick stock-take showed that Hugo and Silas had sold about 60% of their stock. The boys did a final marketing push and increased their turnover significantly in the last few minutes.

Lessons learnt

  • Pay yourself first – put money in your savings account before paying the tuckshop lady.
  • Keep your money somewhere safe. Money that is harder to access, such as in a safe or in a savings fund or policy, is less likely to be spent on impulse purchases.
  • Always have a savings goal in mind. Remind yourself why you’re doing this.
  • All the clutter around you used to be money – and can be money again. Look after your possessions so you can resell them later.
  • There is often a better way to do things. If something isn’t working try something else.

But perhaps the most important take away from these two youngsters is that it’s never too soon or too late to change your circumstances. Hugo and Silas made one final push in the last hour of their trading and it paid off. Many people approaching retirement can learn from this.

This article was first published by News Everyday on 9 July 2018.