In the early days, the focus was on education. Many of our grandparents and parents worked hard day and night to ensure their children could have a good education. Education in those days, was the ticket to wealth.
Their dream was that armed with the right professional qualifications, their children would get good jobs with the government or in large companies, or enter into lucrative professions such as law, medicine and accounting.
For a couple of decades, this held true – but it is no longer the case.
The Skill Of Managing Money
Today, the most important skill any parent can teach their child, regardless of the kind of qualifications they end up acquiring in later life, is the skill of managing money.
This means more than the usual reprimands we all heard from our own parents such as “Switch off the lights – electricity costs money!” or “Don’t waste water, it will increase our water bill!” or “Mummy/Daddy cannot buy that for you, it’s too expensive”.
Teaching your children to be financially savvy means that parents should schedule time to really talk to kids about money, help them to understand what it is and the role it plays in our lives, as well as how to conserve it, spend it prudently, invest it and make it work for them.
Here are some tips to get you started.
First, have a talk with your children to gauge their interest and understanding levels. Obviously, an older child will understand more of what you say, but even a young child could be guided towards developing an interest in money matters. Tell them that money management is going to be the latest family project.
To start off, give your children an allowance. Get them a savings box or piggy bank (or better still, recycle a tin or jar for this purpose). Teach them that they are earning the allowance in return for specific work that they are doing for mummy and daddy, or for achieving good results in school.
(If possible avoid rewarding them financially for doing day-to-day chores, as such behaviour tends to give children the impression that they need not do housework if they are not paid for it.) Help them instead to get used to the idea of getting paid for work done.
Managing an allowance
From the amount they receive in the form of an allowance, one suggestion is that a portion of it must go toward savings, while a portion of the remainder should be retained for investment, another portion for charitable giving, and the rest is his to spend on or save up towards buying something that he wants.
Understanding savings accounts
When opening a savings account for your child, take him along with you to the bank and involve him in the process of opening the account. Give him a simple explanation of the concept of interest. This is sure to lead to an interesting discussion as the child asks questions and you explain further.
Another idea is to involve your child in reviewing the monthly or quarterly bank statements, or set up online access to the account through which you can help your child monitor his account. (To be safe, it’s of course more advisable if you control the online access password, not your child).
You could help your child to note down opening and closing balances in a notebook to get him familiar with the habit of keeping records and tracking the inflow and outflow of money.
Involving children in family finances, positively
We all know that parents are not perfect beings. As parents, we have our share of weaknesses and faults. For some of us, it is managing money. Our own finances may not be in good shape. But let’s think about it. Every month when the bills come in, do we groan loudly in front of our kids?
Do we complain about always not having enough money and “blaming” others for it such as our spouse, our boss, the government, etc etc? The thing is, children learn by observation. We could be unconsciously passing on negative financial behaviours to our children.
A tip to manage this and slowly work towards developing a more positive attitude towards money is to re-phrase/conclude your earlier comments with a positive comment such as “Let’s sit down together and talk about how we can reduce our expenditure and increase the portion of our income left over for savings and investment”.
Encourage your children to come up with ideas, all the while with a positive, “can do” attitude. This will help them to not only feel involved in the family finances and understand that they have a say in the decision-making process, but also to become familiar with the challenge of problem-solving and using creative solutions to make ends meet while also moving forward on financial goals.
Ultimately, teaching children about money could be even more valuable to them than leaving them a large sum of money in your will. It is hoped that these tips can provide some ideas to parents in introducing their children to the concept of money management and pique his interest early, thereby paving the way for a valuable education in financial matters which will stand him in good stead well into adulthood and throughout his life.