Money does not grow on trees” is familiar saying in many homes. Perhaps it was our parents’ attempt to teach us about money. Whether or not they were successful is a story for another day. Experts however agree that children need to learn about money as early as possible.
“Children as early as three can already grasp important concepts on money. This is an ideal age to start the children on the financial literacy path,” advises Elizabeth Waithaka Ndegwa, a financial literary coach, founder of Attique Africa, a Finance Literacy and Investments advisory company in Nairobi.
Brain development at its peak
According
to the mother of four, brain development is at its peak in these early
years, and the money lessons learnt can be long life.
Additionally, teaching children about money helps them in developing good character traits.
“Children develop key traits such as patience, faithfulness, accountability, truthfulness and creativity. They also learn about the importance of responsibility. This prepares them to become financially responsible citizens who will build strong families, neighbourhoods as well as local and international communities,” she adds.
The coach, who also runs a financial empowerment programme for children aged five and above, emphasises the importance of engaging children in activities and discussions around money. Advertisement
Make it fun and highly interactive.” she advices. “Start by teaching them what money is and where it comes from. The most important lessons parents need to teach their children is the relationship between money and work. Money does not just come from mum’s or dad’s pockets. They earned it from somewhere. As such, it should be spent wisely,” she says.
“You can also teach them about different currencies and later, introduce lessons such as the difference between needs and wants, comparison shopping, saving and growing money,” she adds.
Get them saving in a piggy bank
Children
need practical ways to practice abstract ideas. Having a piggy bank for
children at an early age is not only helpful in getting them confident
on matters, it also helps parents to be able to start conversations on
money.
“Savings are a powerful money management secret and the security of your savings is a factor that should be put into consideration. Money in a piggy bank may not be completely secure. However, it’s good idea to cultivate the habit of saving. Of course there should be a plan to secure the savings every so often,” she notes.
Set a good example
Just as we learnt our first lessons on money from our parents and communities, our children also learn from us first.
“Our financial blue prints are entrenched in us from an early age through watching people’s interactions with money. For example, children will notice when parents argue about money, they will notice when you give or ask for change. We should aim to set good examples for children, mainly through our interactions with money.” states Waithaka.
Teach them the value for money
“Financial
literary gets children to understand the value of things. They also
learnt that the best things in life are free. For example, they need to
understand that no matter how much money they have they cannot buy
sleep, laughter or love.”
Show them opportunity cost
Teaching
children opportunity cost allows them to understand that they need to
always weigh their decisions carefully before a purchase.
“Children
should learn to weigh the cost of the foregone alternative. If they buy
this item, they’ll miss out on another, and they need to accept it.
This helps in developing patience and the character of moderation,”
explains the coach.
Give commission not allowances
In
teaching children about money, you can give them commissions based on
the chores they did, be it at home or even while at that visit to your
office.
“By giving commission, we cultivate a character of discipline and hard work in children. This also helps in emphasizing the concept that money is earned and not just given,” she says.
Teach them to avoid impulse buys
It
is important to teach children the importance of a budget. “We should
discourage children from making impulse buys. Getting something on a
different day may help them see that they do not really need it after
all,” says the coach.
“Children’s financial literacy is a core life skill and especially in this complex modern world that our children are growing up in. Whether children come from low-income backgrounds or more privileged ones, learning basic concepts of personal finance like saving, sharing and spending is essential for growth and child development. The early years of life are the best time to start,” she concludes.