There are no educational curriculum programs specifically for teaching good money habits in school and conversations about money between parents and their children are often considered taboo, however sheltering your children from financial realities does them no good. Our current educational system teaches our children the skill sets needed to generate income but leaves out the most important part – How to manage the money generated for future use or benefit. Therefore, your responsibility as a parent is to give your child the gift of good money habits. Here is a short guide to get you started.
- Have an investor’s mind; The earlier you start investing, the better! Investing is key to securing a stable financial future. It’s your responsibility as a parent to nurture that investment instinct in your child. Make investments together and assist them in periodically reviewing those investments. Set aside time each week to check on their financial goals, this will motivate them to save more.
- Open a savings account for your child; the earlier the better. Several different banks are always willing to help your child start their financial journey, pick one that works best for you. Make regular deposits together for special occasions such as birthdays or an achievement e.g. good school performance.
- Play money games with your child; From the time your child is old enough to count, you should begin to familiarize them with money. Play with them to help them recognize and count money. During your visits to the market/supermarket take your child with you, and give them a small amount of money to spend as they wish. Let them know if they don’t want to spend the money and want to save it that’s Ok too.
- Pay your child a “Salary” for designated tasks; your child must learn early that money must be earned. At the end of the month, you can sit down with your child and decide what percentage of their salary, will be saved, spent and invested.
- Tax them: a big part of understanding money, is understanding how taxation works. Any money your child earns from their chores should be taxed.
- Set a savings goal; Money issues often arise because we always want more than we can afford. To get your child excited about savings set a goal with them. Is there a particular toy that they want? Find out how much the toy costs and based and help your child set a savings goal of how long it will take them to buy the toy for themselves (please remember to keep the time frames reasonable e.g. a month)
- Track their spending: Part of good money habits is tracking where your money is going. Have your child write down their spending each day and add them up at the end of the week. For younger children, you can help them do this. Understanding how “small” purchases can add up can be an eye-opening experience for your child
- “Lend” your child money: Not living beyond your means is probably the most fundamental money rule. If there is a purchase your child must act as their creditor, you will lend them the money they want and have them use their “salary” to pay you back the initial amount in addition to some interest. This teaches them two lessons; that borrowing has a cost and that delayed gratification is always cheaper.
- Show them the opportunity cost: Children need to understand that buying decisions have consequences and that they can’t have everything they want. In other words, if they choose to spend their money on one item then they will have to forgo another.
- Curb impulse buying: Your child needs to decide before a purchase is made what they intend to buy from their earnings. Once this decision is made do not allow them to deviate from this choice. The more “expensive” this purchase is relative to their earnings/savings, the more important it is that you enforce this. If they are adamant about their decision, give them a few days to think about it before you return to the shop
- Offer saving Incentives: The main reason adults choose to participate in their employer’s savings plan (SACCO), is the company’s matching contribution. This concept can be applied to your child, for every agreed-upon savings milestone reached, you can offer to match a percentage of the amount reached.
- Avoid temptation. Let your children accompany you to the mall when you go shopping. Actively demonstrate you have to forego treats such as chocolates, candies etc. This teaches them how to be disciplined and that self-denial by not buying yourself the nice things in favour of necessities such as books, pens etc. is not a bad thing
- Write down your expenses. There is a need for your child to learn, understand and plan their money use on a daily, weekly and monthly basis. You serve as the best example of this, so write down your expenses and let them see you do it e.g. Expense tracking can be a long and tedious task but try and make it seem as enjoyable as possible,
- Think long-term. Teaching your child how to think in the long term can be the best weapon in your arsenal for teaching them how to save. Some of the things you could shed light on are: Setting aside an emergency fund, education fund, getting insurance etc.
- Lead by example: As any parent knows, children observe what you do more than they listen to what you say. Tasking yourself with being a conscientious steward of money and demonstrating and vocalizing this regularly, is the best way to teach your child how they should relate to money.
Love, attention and care are all invaluable to your child, and so is an uninterrupted education. Mwananchi Credit is a financial institution that specializes in lending products. For more information on our school fees loan please contact us on 0709 147 000 or SMS loan to 23877.
Enjoy the school holidays with your children!