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Raising Money-Smart Kids

Sunday, August 09, 2020

As our country recently celebrated another year of Emancipendence, it's probably a good time to reflect on how financially emancipated and independent you really are. One of the ways your financial well-being is guaranteed is when you and your family are on the same page in terms of building lifetime wealth. After all, doesn't teamwork make the dream work?

An important facet in securing wealth for the long haul is the empowerment of your children. Help them develop financial literacy skill sets so they can become adults who respect and understand the value of money. In this way your family will steer clear of the pitfalls that other families sometimes find themselves in, which can see them going from financial well-being to financial ruin from one generation to the next.

But how, and when, do you talk to your children about money?

Research has shown that kids from as young as three can grasp basic money concepts if explained in an age-appropriate way. So, when's the best time for children to start learning about money? Now!

As with most of the habits they form, children will take their cues about money from you. If you don't speak to them about it, they'll get their ideas from someone else, someone who may not have the best relationship themselves with money. Some parents think that money is the last thing they ought to be talking to their children about, but that's really not true. You don't have to burden them with complexities.

Moulding Money-Conscious Children

1. Be an example; this is the best gift you can give your children. Do you have a healthy relationship with money? Or, are you always borrowing from Peter to pay Paul? Avoiding creditors? Spending on impulse purchases? Children pick up on bad behaviours of the adults around them and will mimic them when they get older. Instead, take them supermarket/grocery/car shopping. Let them see you weighing your financial choices carefully.

2. Set family goals. A well-articulated plan for the family's money goals, even in well-to-do households, makes children realise that money doesn't grow on trees. The kids want a pet? Let everybody to get in on the purchase. Getting an appliance like a TV that's on hire purchase? Since everyone will benefit from its use, a good bonding experience may also be derived from the family pooling together, appreciating the joy of milestones achieved. Don't think of it as crowd sourcing! It's inculcating the value of considered money decisions in your children.

3. Differentiate between chores and odd jobs. Chores, like making their beds, and cleaning their school shoes, are what is expected of them in the natural course of becoming fully formed individuals. Anything extra, however, like mowing the lawn or washing the family car, can be rewarded. The lesson is the value of a dollar: Money is earned from hard work not from being cute! It also helps with shaping their work ethic, too, and you have the opportunity of sharing in teachable moments with them about avoiding gender stereotypes.

4. Budgeting is essential. When your children receive an allowance, show them that they don't have to spend it all immediately on non-essentials. Is there a video game they want? Instead of simply buying it for them, encourage them to put some of their money aside to assist with buying the thing they desire. You can even volunteer to go halfsies in with them if their target goal is high. A positive side effect here is children learn the worth of delayed gratification.

5. Explain debt. Today's children are more than ever bombarded with images from a variety of platforms. One thing they see and may not fully grasp is the nuts and bolts of plastic. It seems laughable, but children, even older ones, often think anything can be magically purchased with a flash of the ubiquitous credit card, not understanding that a card is in fact a financial obligation. A recent study showed the mean credit card debt in American households to be staggeringly over US$5,000. For your school-leavers, in particular, who will soon be bombarded with multiple card offers, this myth must be debunked. My niece recently announced that I have lots of money because I have credit cards and debit cards. What she didn't understand at the time is that credit cards come at a cost and have to be paid and money doesn't magically appear on your debit card.

6. If you operate a family business, it's a good idea to involve the children from an early age, on weekends and holidays, so they can develop an appreciation for how they're afforded nice things, and to discover whether they are interested in it, for it to be potentially passed down to them in the future. Also, the work experience for older children's resumes, in terms of college applications, is vital. At an early age I learnt customer service, stocktaking, bookkeeping and negotiating just by working after school in the family business; it taught me work ethic and how hard it really is to earn a dollar.

7. Giving is a must. Children must learn that to whom much is given much is expected. Whether it's church offering, starting a charity, or contributing to a needy peer, they should learn that they aren't the centre of this broken world which exists outside of themselves. An irretrievable law of the universe is always, always, that in giving they will receive (not necessarily in kind), and in so doing, leave the world a little better than they found it.

Use this time of reflection to define a wealth strategy for your family in order to emancipate your minds from financial slavery.