How to raise financial savvy kids
When I was a kid, I did not have any clue what money was all about. All I knew was that my dad would go to work in the morning and then I will be at home with mum the whole day/ at school etc.
Money was not something that we discussed over the table, nor was it something that was told to be important. I also did not notice that we were scarce of anything since food and clothes were all we needed.
My first memories of money as a kid was when my mum brought me to one of the foreign banks in town to open a savings account and got myself a Donald Duck coin box. We then began to load up the coin box and then soon after there will be trips to the bank to bank in the money. All this while, I had no idea of what the money was supposed to be for. I only knew that it was something we do.
Fast forward some decades later, do we still think that kids today have no notion of what money is? Do we believe that kids today can afford NOT to know what money is and what it can do? And then we also ask at what age should kids be exposed to the money concept and more importantly, how do we start teaching them?
The very basic thing that parents can do is to talk to kids about the concept of money through the concept of scarcity. This is the very basis of economy 101 and we should never underestimate the ability of kids to understand this. However, the way we approach the child has to be age specific and not too technical. Begin with telling them that for everything that they choose, they have to forgo something else. If they choose to have the ice-cream, then they cannot have the lollipop. If they choose to watch Little Einsteins, then they cannot play in the sun. The mistakes that we generally make is that, we tend to give the kids too much of eveything that things are often taken for granted.
I personally think that starting kids with a coin box/ piggy bank is a very good idea. Not only do we instill the concept of “saving”, we also encourage conversations about the value of the coins that go in. Parents can take this opportunity to talk about the size of each coin and the number associated with it and how much is targeted to saved, how they can go about getting in the coins etc. This conversation has to be age specific in order for the child to understand.
Apart from that, trips to the bank to expose them to the whole financial market would also be good. Explain concepts like savings and deposits. What the bank does with the money we deposit and how that in return helps to make our money work harder for us. Explain also alternative ways to make our money grow – investmentcredits for example which the bank can also help us with.
However, all these money talks are not good anough if the child does not understand how the money got to us in the first place. This is where we can talk about our working life. It does not mean that we have to work to get money, we can also be investing smartly, be part of a successful business venture etc. Basically, explain how the money go to us and what we had to do to obtain it – worked hard, read up, took calculative risks. All these things will help the child understand that money does not fall from the sky.
When a child knows that money does not magically appear, concepts like earning before spending, paying myself first and spending within my limits will be easier to understand. With the amount of credit available out there, one is never too young to fall into that horrible trap and as parents, we are responsible to help expose our children to this danger and help them from young how to avoid this trap.
Of course, with all said and done, as parents, we have the responsibility to ensure that we are setting a good example for the kids to follow. This is where talking the talk is not good anough, we also have to walk the talk. We have to show them how we deal with money as a responsible adult and encourage them to be part of your financial planning too. Simple things like how much do we need for groceries this month, how do we cut down the utility bill etc. All this will help the child understand the need for better financial management and how this will impact them in the future.
Most importantly, begin teaching your kids about money today, do not wait till they are “old enough” because we simply do not know when that is!
