This week is Global Money Week, an annual international money awareness celebration which takes place between 9 – 17 March 2015. Global Money Week engages children worldwide in learning how money works, including saving, creating livelihoods, gaining employment, and entrepreneurship.
Just as important as self-grooming and problem-solving skills, money-management skills are often overlooked during a child’s development, which produces an adult who struggles with her personal and business finances. You may have been that child (who as a grown-up has now identified the knowledge gap and is taking steps to narrow the gap), but there is no reason why your own children should not have a different journey :-). Here are some practical tips to get you and your children / wards started:
1. Develop the ability to say “No”
The only reason we have to manage the money in the first place is because it comes in very (some would say extremely) limited supply. If there was an abundance of money available, as there is air, there would be no need to plan (i.e. budget) and save. This is why it is extremely important to say “no” every now and again to (1) your kid’s request, and (2) your impulse to spend money on things your child does not need. It is important to say “no” to these non-needs based requests and impulses especially when you can comfortably say “yes”. This starts to teach the little person that she cannot always get what she wants because resources are scarce, and she has to learn how to be okay with that – the beginning of financial self-discipline.
2. Take them shopping with you
If you are like me, the thought of doing this fills you with dread! It is very important though, especially if you are already on the right personal finance path of always preparing a shopping list before leaving home. It is a very well-known saying that kids learn a lot more from what they observe than what they are told. As they watch you prepare your list, making choices between various items and alternatives of items, and then watch you making the live choices at the market / store, which may include some haggling to get the best possible bargain, they are learning that this resource called money is truly scarce, and they have to learn to efficiently allocate it to their various needs and (if there is some left over) wants.
3. Open a bank account for them
Almost every one of us has a bank account, and almost every bank has an account type designated for young people. Open an account for each one of them as soon after they are born as you can, and develop the discipline to deposit in that account any money that has been gifted to them (during the naming ceremony, for birthdays, when the rich uncle comes to visit, etc). When the child is old enough, usually from about age 5, you can start taking her to the bank to make those deposits herself. So, when she receives a cash gift, instead of allowing her immediately go spend it (or you allow her make you go spend it :-)), encourage her to allow you keep it for her (means you should not spend it either :-)). Also encourage her to keep a record of how much she has saved with you, and on a designated day each month, take her to the bank, let her fill out the deposit forms with your guidance, and deposit the cash at the teller. In addition to setting up the seed of a nest egg for them, you are introducing to them to the concept of saving (delayed gratification), compounding interest (no matter how tiny the interest is :-)), bank products, and helping them establish a banking relationship that they will surely benefit from. Also, most of these accounts come with a membership that entitles the child to periodic gifts and rewards, participation in certain competitions that enhance other skills, and provide access to various forms of educational information.
4. Be who you want them to be
Back to the mantra of kids learning from what they observe rather than what they hear. Your actions and behaviour are the most fundamental lessons your children will learn. This is the reason why you want to start imbibing for yourself the values that you want your children to have. Most of the best money managers we have today were influenced by the relationship their parents / guardians have with money.
Do you have some tips of your own that you would like to share? Do you have any questions pertaining to your own money management style? Have the above tips caused you to identify some money management gaps of your own that could benefit from some guidance? Do drop a line or two below, or send an email to email@example.com.
Until next time, keep in mind the Global Money Week slogan: Save Today. Safe Tomorrow.
I agree with everypoint made but some parents/ guardians are not real great money managers and the manner at which money is spoken of by some makes the understanding and the appreciation as well as importance of wealth/money management less important.
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I totally agree! That is why it is extremely important for one to model the behavior that we want our kids to follow: in order to groom money-smart kids one has to be money-smart him/herself.
Very well said Bash. We used the piggy bank system until recently (my first 2 each have their own bank accounts now, complete with personalized debit cards 🙂 ). With the piggy banks, we would start a new “account” on the 1st day of every year. They were not allowed to open it until Christmas eve, at which time they were allowed to remove a limited amount to get something for themselves and also donate an amount to a charity. Since they only can buy 1 gift for themselves they usually think long and hard before settling on a gift choice. This way they learn the art of financial discipline, the concept of Opportunity Cost and the need to give to the less privileged. Truly, the importance of being disciplined with money cannot be over-emphasized.
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That’s great Tosin! Really good one about giving back 👍
Awesome idea. I would have stolen the piggy bank idea but my three already have bank accounts and they carry on a ‘saving’ competition among themselves.
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Cool! Do share re: the saving competition – is it simply about who has the most money in account at a point in time? What’s the winner’s prize?
I was so excited to read this because I do believe teaching children about money very early on will set them on the right money path for life. I do understand the dread in taking them shopping with me but I will try it, one child at a time. It could be our thing. The account is definitely in the works. It takes a bit of effort raising money savvy kids but the effort is worth it.
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Kudos and good luck 😊
Finomics 101 will endeavor to provide more tips to guide you along the way…