There doesn’t seem to be a better time to learn about finances than in a recession but it is even more crucial to teach the next generation to understand finances and how to manage their money. Teaching kids about finances will guarantee a generation that will most likely have better personal resources and a better economically managed Nigeria.
As a parent, making your kids part of your financial decisions can improve their sense of responsibility as well as make them more conscious of how finances are part of our daily lives. Kids as young as 3 years old can start to learn about money, a study by researchers at the University of Cambridge revealed that kids’ money habits are formed by age 7, so it is never too early to start teaching your children about money.
Even if they are beyond this age, it is also not too late. The older kids are, the more they can understand the life experiences and the easier it will be to for them to understand savings and budgeting. Here are a few tips to help you begin the finance journey with your children:
2. Delayed Gratification: Teaching your kids to wait for something they really want can encourage them to learn delayed gratification. Studies show that delayed gratification is one of the most effective personal traits of successful people, being able to delay gratification leads to better success later in life. Another benefit of delayed gratification is it teaches better impulse control, impulse control can be a struggle, but learning how to control our impulses is vital in our daily lives. Your kids will learn that they do not have to buy everything they see.
3. Earning money: Attaching allowances to certain chores, no matter how small, is a good way to help kids understand the value of money as a step to managing it well. When they have their own money, it becomes more practical to teach them how to spend it (understanding needs vs wants). As an example, paying your kids N500 for chores per week allows them to earn and save money, providing them with the opportunity to learn how to use money.
4. Spending money: Let’s be honest, even as adults we don’t always make the best decisions about how to spend money but that doesn’t mean our children can’t be better. We can start off by letting them make some financial decisions, for example, give a seven-year-old 100 naira and let her choose which fruit to buy within your shopping list. The sooner parents start taking advantage of everyday teachable money moments the better off our kids will be.
5. Saving Targets: Merely asking a child to save, without explaining why, may not provide enough motivation to keep them dedicated. Helping children define a savings target can be a better way to get them motivated. If they know what they want to save for, help them break down their goals into manageable bites so they understand how long they have to save for to get something they want, simultaneously encouraging delayed gratification.
6. Savings accounts: When your kids have a savings goal, the next step is to help them figure out where to save their money. For younger kids, a physical saving device like a piggy bank or kolo box would work well. For older kids a bank account would be a great idea, certain banks have accounts aimed at young teens with close to no account charges and saving incentives that help their money grow (check here). You can go to the bank with your kids to open an account and encourage them to fully participate in the process, in the process teaching them the banking process.
7. Budgeting: Similar to setting savings targets, you can involve your kids in your monthly or weekly home budgeting so they can get a certain sense of what is involved in the provision of groceries and paying of bills around the house. That is a great moment to engage your child in how much grocery items cost and really get them to dialogue with you about it.
8. Leave room for error: When we afford our kids a level of freedom in their financial choices it is unavoidable that they may make some cringe-worthy decisions, sometimes it is okay to let them face the repercussions of choices they’ve made. For example, if they’ve set a target for certain items and they overspend on one of those, as long as it isn’t harmful, you could let them understand how some choices can affect their ability to get something else.
9. Giving: Introducing the concept of giving back at a young age will give you a good opportunity to talk about money. Let your kids know what you are doing to help others and talk about how they can raise money to help.
10. Set a good example: Be who you teach them to be, If you want your children to become savers, being one yourself can help. Without the parental input early, often and consistently, you see adults come into the world who really don’t know how to handle money or manage their financial lives. The absolute best way for them to learn is to watch how you manage money.