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Money management is a lifelong journey. So, it only makes sense to start learning the rules of engagement early in order to gain expertise. Teaching your children about money is an important life lesson. In the same way as practicing healthy eating habits improves the quality of life, learning how to maintain a healthy financial lifestyle can help ensure your children have a stress-free financial future.
How early can you begin? Ideally between 3 and 6 years of age as children grasp the concept of numbers and learn to count. Start with the simple concept of saving using coins in a mason jar – the feel, sound and sight of coins accumulating in a clear money bank will engage little children. They can also watch how you pay for things when they accompany you to a grocery store or withdraw cash from an ATM. Children are observant and will enjoy mimicking your behavior so encourage them to role play with shopping for groceries. Learning through play will help them grasp the concept of trading good and services for cash and also improve their arithmetic skills by adding, subtracting, multiplying and dividing!
Needs vs wants
Children are astute and as they grow up and visit friends’ homes on playdates or social visits they may question why your house is bigger or smaller, notice who drives a fancier car or why their friends have more or less toys than them. Help them gradually understand the difference between needs or wants i.e. larger families may need a bigger home or car. Gradually introduce the correlation between income and lifestyle by explaining what you do for work and how you pay bills at the end of each month. Children do not need to be burdened by parents’ financial problems or be exposed to negative comparisons and ‘neighbour’s envy’ so focus on a factual discussion that helps them discern between essential and non-essential spending.
All parents are familiar with on-the-spot demands by little ones when they catch sight of an attractive window display at a toy store. While toddlers may not be open to reason and patience, as children grow up, encourage them to save up towards what they really want. If you pay your children for little household chores or reward them for a full week of making their bed and putting away toys, they can begin to understand how to effectively work towards goals. Help them understand the power of decision making. It could be little things such as a choice between buying unhealthy treats when you are out or ‘saving’ up for a fun outing later. Teaching children to avoid instant gratification at an early age is crucial and will help them avoid unhealthy spending or impulse shopping on their credit cards when they turn into young adults.
As cash turns digital and paying by card or a wearable become the norm, we need to evolve how we learn and teach the future generation about money. A good way to begin is to use pre-paid gift cards for a book or toy store as a present for birthdays and special occasions. Explain how they can either spend as they like, choose to accumulate till they reach a defined goal to buy a much larger item or plan carefully so they can purchase multiple items to make up the full amount. Supervise their decision making but allow them to make mistakes as failing quickly is an essential component of a successful learning curve when they become adults.
Introduce the concept of giving
Children can learn to be giving at a very early age. Start with teaching them to donate toys they no longer use to a neighbourhood charity or a deserving home. Use festivals such as Eid or Christmas to help them understand the concept of sharing and giving. Giving can be a powerful feeling and you can teach them to give of their time and pre-loved possessions before introducing concepts such as zakat or tithe i.e. putting aside 10% of income every month for a good cause.
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