32-34 Kids finance.indd
good value
Kids' finance
It’s all about the money;
The importance of raising financially savvy kids How can you teach your children the value of money? What can they understand, and at what age? The number crunchers at financial comparison website compareit4me.com explains that learning can start early – and have serious benefits
Ridiculously rewarding, of course, but tough. It’s a 24/7 job for many years, conducted on minimal sleep. But despite that sleep deprivation and hard graft, it goes without saying, every parent is happy to do it all and more, because they want to raise a good child. To teach them the behaviour, thought processes and values they need to flourish and to give them the essential life skills to help make their journey through life enjoyable and fruitful. Lessons like respect, manners, winning and losing (gracefully!), tolerance, and the importance of telling the truth are all pretty obvious lessons to teach a child and are probably done as a matter of course and without the parent even giving much thought to it. But what about financial literacy? While most children quickly grasp the fact that money comes from a wallet or from a machine, the chances are they probably have no idea how it comes about and how to handle it, and it’s even more unlikely they have any clue about the importance of managing it properly. Good financial skills are essential to ensure, as adults, we get through life without too many bumps or pitfalls. From building savings to call upon in retirement, or to fall back on in the case of an emergency, to avoiding debt; a healthy understanding of the concept of money is vital. And like with most valuable life lessons, it’s good to learn about money young so that good ‘financial habits’ can be implemented from the get go. At compareit4me.com, the importance of teaching children financial literacy has become a bit of a theme for us recently, after a survey we carried out on the saving
IMAGE: shutterstock
32
Whether we have our own little ones or not, we can all recognise just how tough being a parent is.
March_2016
habits of UAE residents revealed some worrying results. Of those who responded, 30% admitted that they don’t save a single dirham, with 13% of those revealing they believe ‘life is too short to save’. Adults believing ‘life is too short to save’ is concerning enough, but what adds some extra alarm bells to it, is the fact that while living in the UAE has too many benefits to mention, on the flip side, it’s a country where pensions and social benefits don’t exist. That means even more importance should be given to making financial goals and savings plans and once those plans are in place, they should be stuck to with even more diligence. To help stop the next generation from making bad financial decisions (we’d love to never see those scary ‘life’s too short to save’ stats from one of our surveys again!) and to help them enjoy financially fit lives, children need to be taught the essentials about money. This doesn’t mean as a parent you need to start firing financial facts and stats at them, instead provide them with age-appropriate money lessons. And don’t ever think it’s too early to start, as children as young as three, for example, can grasp financial concepts, particularly saving and spending. Jon Richards, compareit4me’s CEO, has a four-year-old daughter and he and his wife made the decision to start teaching her early about the concept of saving, along with lessons about why it’s important. For them, giving their daughter a moneybox so she can save up to buy something on her own has worked well. They’ve also offered lessons about the value of money, by explaining to their daughter there are other children
around the world who are less fortunate than her and don’t have as many toys, for example. Whatever the age of your child, there’s always a valuable lesson they can be taught. As we all well know, there’s a smartphone app for pretty much everything these days and, as we most certainly all know, children love iPhones and iPads, so if you want to add some colourful visuals and fun games to help make the learning of smart money skills more fun, there are plenty of great options on the App Store. Savings Spree and PiggyBot are among the most popular, but the choice is huge. Whether you decide to add some apps into the teaching or not, here’s a few suggested lessons for different age groups. Remember, giving a child simple lessons today will help to give them a solid foundation for making wise financial decisions in the future, which means a winwin for them and you.
Ages 3-5 The Lesson: Money doesn’t grow on trees • You need money to buy things • You earn money by working • You may have to wait before you buy something • There’s a difference between things you want and things you need Some parents find it hard to say ‘no’ when their child is asking for something, or when something they have and love breaks and they want/expect it to magically be replaced. But in order to help them understand the importance of having a budget, setting a spending limit and having March_2016
33
good value
Kids' finance
to wait to get things, parents need to know when to say ‘no’ and to not just give in and buy something. If a child asks for the latest iPad and they can’t afford it, for example, it’s helpful for a parent to explain the iPad is a cost they can’t afford this month, and that maybe they can look to buy it next month. Explain that mummy and daddy have to go to work to earn money to buy things and encourage them, in the same way compareit4me’s CEO Jon does with his daughter, to save up their own money in a moneybox, so they can appreciate the process and enjoy finally being able to buy something of their own, like a book.
Ages 6-10 The Lesson: The value of money • You need to make choices about how to spend your money • It’s good to shop around and compare prices before you buy During these years, it’s important to explain to children that money is finite so it’s important to make wise choices. They need to grasp the concept that once you spend the money you have, you don’t have more to spend. Carry on with the lessons about saving and encourage them to carry on adding to their moneybox, but add in some decision making and comparison. You could, for example, give your child Dhs10 in the supermarket and get them to select some fruit. Also teach them that some shops are more expensive than others, so you shouldn’t always buy the first thing you see. Setting chores and rewarding them with varying amounts of money to suit the size of the chore is also a good idea. That way they learn about earning.
34
March_2016
Ages 11-13 The Lesson: Save, Save, Save • You should save a percentage of all money you receive • The sooner you save, the faster your money will grow Now the child has a basic idea of saving, you can take things up a gear. Move the goal posts a little and get them thinking about saving for long-term goals, rather than just short-term. For example, you could ask your child to choose something slightly more expensive they would like to buy and then help them to set a long-term goal so they can save enough to buy it at the end of a given period. Suddenly that after school chocolate bar they used to buy and enjoy daily won’t seem so appealing when they know the money can go towards something more exciting instead. Also, explain the idea of interest to highlight greater the benefits of saving and get them to do some simple math so they can appreciate how their money can grow.
Ages 14-18 The Lesson: Understand how much further education costs • Compare the prices of colleges/ universities • Using a credit card is like taking out a loan – it’s not free money Help your teen to understand money doesn’t come easy and that while further education is important (if that’s what they want to do, of course), it costs. Sit together and compare the prices of colleges and universities so you can reach an agreement together. This is also the time to hammer home the importance of managing credit cards. At this age, teens need to know that credit cards aren’t free money and that
they’re not there to use when all other funds run low. Teach them that a credit card or bank loan shouldn’t be used to fly to an expensive place for a vacation, or to get a new car every year when you can barely afford it. Children pick up habits from what they see, and if you’re breaking your budget and living lavishly, you are indirectly teaching your child that living big or upgrading your lifestyle is more important than spending responsibly.
Ages 18+ The Lesson: Debt management • Always pay off your credit card bill in full every month • Save 20% to 30% of your monthly salary It’s all too easy to fall into debt once credit cards get thrown into the mix. This is when you need to drum in how crucial it is to firstly, not rack up a huge bill on plastic and secondly, to pay off any outstanding amount in full every single month. Explain that missing payments will have repercussions in later life, inhibiting them from borrowing money when they need it to buy property, for example. Teach them too about how the interest continues to get added to debt and that it’s important not to just whack everything on a credit card because they’re too lazy to carry cash. This is the time when they also need to start putting a savings plan into action. Getting them into the idea early of putting away a percentage of their salary every month without even hesitating will ensure they continue the habit through their lives, which will result in them having a wonderful little nest egg ready and waiting for them when they need it.
Kids' finance
It’s all about the money;
The importance of raising financially savvy kids How can you teach your children the value of money? What can they understand, and at what age? The number crunchers at financial comparison website compareit4me.com explains that learning can start early – and have serious benefits
Ridiculously rewarding, of course, but tough. It’s a 24/7 job for many years, conducted on minimal sleep. But despite that sleep deprivation and hard graft, it goes without saying, every parent is happy to do it all and more, because they want to raise a good child. To teach them the behaviour, thought processes and values they need to flourish and to give them the essential life skills to help make their journey through life enjoyable and fruitful. Lessons like respect, manners, winning and losing (gracefully!), tolerance, and the importance of telling the truth are all pretty obvious lessons to teach a child and are probably done as a matter of course and without the parent even giving much thought to it. But what about financial literacy? While most children quickly grasp the fact that money comes from a wallet or from a machine, the chances are they probably have no idea how it comes about and how to handle it, and it’s even more unlikely they have any clue about the importance of managing it properly. Good financial skills are essential to ensure, as adults, we get through life without too many bumps or pitfalls. From building savings to call upon in retirement, or to fall back on in the case of an emergency, to avoiding debt; a healthy understanding of the concept of money is vital. And like with most valuable life lessons, it’s good to learn about money young so that good ‘financial habits’ can be implemented from the get go. At compareit4me.com, the importance of teaching children financial literacy has become a bit of a theme for us recently, after a survey we carried out on the saving
IMAGE: shutterstock
32
Whether we have our own little ones or not, we can all recognise just how tough being a parent is.
March_2016
habits of UAE residents revealed some worrying results. Of those who responded, 30% admitted that they don’t save a single dirham, with 13% of those revealing they believe ‘life is too short to save’. Adults believing ‘life is too short to save’ is concerning enough, but what adds some extra alarm bells to it, is the fact that while living in the UAE has too many benefits to mention, on the flip side, it’s a country where pensions and social benefits don’t exist. That means even more importance should be given to making financial goals and savings plans and once those plans are in place, they should be stuck to with even more diligence. To help stop the next generation from making bad financial decisions (we’d love to never see those scary ‘life’s too short to save’ stats from one of our surveys again!) and to help them enjoy financially fit lives, children need to be taught the essentials about money. This doesn’t mean as a parent you need to start firing financial facts and stats at them, instead provide them with age-appropriate money lessons. And don’t ever think it’s too early to start, as children as young as three, for example, can grasp financial concepts, particularly saving and spending. Jon Richards, compareit4me’s CEO, has a four-year-old daughter and he and his wife made the decision to start teaching her early about the concept of saving, along with lessons about why it’s important. For them, giving their daughter a moneybox so she can save up to buy something on her own has worked well. They’ve also offered lessons about the value of money, by explaining to their daughter there are other children
around the world who are less fortunate than her and don’t have as many toys, for example. Whatever the age of your child, there’s always a valuable lesson they can be taught. As we all well know, there’s a smartphone app for pretty much everything these days and, as we most certainly all know, children love iPhones and iPads, so if you want to add some colourful visuals and fun games to help make the learning of smart money skills more fun, there are plenty of great options on the App Store. Savings Spree and PiggyBot are among the most popular, but the choice is huge. Whether you decide to add some apps into the teaching or not, here’s a few suggested lessons for different age groups. Remember, giving a child simple lessons today will help to give them a solid foundation for making wise financial decisions in the future, which means a winwin for them and you.
Ages 3-5 The Lesson: Money doesn’t grow on trees • You need money to buy things • You earn money by working • You may have to wait before you buy something • There’s a difference between things you want and things you need Some parents find it hard to say ‘no’ when their child is asking for something, or when something they have and love breaks and they want/expect it to magically be replaced. But in order to help them understand the importance of having a budget, setting a spending limit and having March_2016
33
good value
Kids' finance
to wait to get things, parents need to know when to say ‘no’ and to not just give in and buy something. If a child asks for the latest iPad and they can’t afford it, for example, it’s helpful for a parent to explain the iPad is a cost they can’t afford this month, and that maybe they can look to buy it next month. Explain that mummy and daddy have to go to work to earn money to buy things and encourage them, in the same way compareit4me’s CEO Jon does with his daughter, to save up their own money in a moneybox, so they can appreciate the process and enjoy finally being able to buy something of their own, like a book.
Ages 6-10 The Lesson: The value of money • You need to make choices about how to spend your money • It’s good to shop around and compare prices before you buy During these years, it’s important to explain to children that money is finite so it’s important to make wise choices. They need to grasp the concept that once you spend the money you have, you don’t have more to spend. Carry on with the lessons about saving and encourage them to carry on adding to their moneybox, but add in some decision making and comparison. You could, for example, give your child Dhs10 in the supermarket and get them to select some fruit. Also teach them that some shops are more expensive than others, so you shouldn’t always buy the first thing you see. Setting chores and rewarding them with varying amounts of money to suit the size of the chore is also a good idea. That way they learn about earning.
34
March_2016
Ages 11-13 The Lesson: Save, Save, Save • You should save a percentage of all money you receive • The sooner you save, the faster your money will grow Now the child has a basic idea of saving, you can take things up a gear. Move the goal posts a little and get them thinking about saving for long-term goals, rather than just short-term. For example, you could ask your child to choose something slightly more expensive they would like to buy and then help them to set a long-term goal so they can save enough to buy it at the end of a given period. Suddenly that after school chocolate bar they used to buy and enjoy daily won’t seem so appealing when they know the money can go towards something more exciting instead. Also, explain the idea of interest to highlight greater the benefits of saving and get them to do some simple math so they can appreciate how their money can grow.
Ages 14-18 The Lesson: Understand how much further education costs • Compare the prices of colleges/ universities • Using a credit card is like taking out a loan – it’s not free money Help your teen to understand money doesn’t come easy and that while further education is important (if that’s what they want to do, of course), it costs. Sit together and compare the prices of colleges and universities so you can reach an agreement together. This is also the time to hammer home the importance of managing credit cards. At this age, teens need to know that credit cards aren’t free money and that
they’re not there to use when all other funds run low. Teach them that a credit card or bank loan shouldn’t be used to fly to an expensive place for a vacation, or to get a new car every year when you can barely afford it. Children pick up habits from what they see, and if you’re breaking your budget and living lavishly, you are indirectly teaching your child that living big or upgrading your lifestyle is more important than spending responsibly.
Ages 18+ The Lesson: Debt management • Always pay off your credit card bill in full every month • Save 20% to 30% of your monthly salary It’s all too easy to fall into debt once credit cards get thrown into the mix. This is when you need to drum in how crucial it is to firstly, not rack up a huge bill on plastic and secondly, to pay off any outstanding amount in full every single month. Explain that missing payments will have repercussions in later life, inhibiting them from borrowing money when they need it to buy property, for example. Teach them too about how the interest continues to get added to debt and that it’s important not to just whack everything on a credit card because they’re too lazy to carry cash. This is the time when they also need to start putting a savings plan into action. Getting them into the idea early of putting away a percentage of their salary every month without even hesitating will ensure they continue the habit through their lives, which will result in them having a wonderful little nest egg ready and waiting for them when they need it.
