I got a friend to help me quiz some children between 5 & 6 years in his Sunday School class. 30% said they didn't know where money came from. The remaining 70% gave the following answers to the question "where does money come from?"
- Mum & Dad
- Kibaki
- From God
- The bank
- From teachers
- From the government
- The church
The life-long benefits of teaching children good money habits make it well worth the effort. Children who are not taught these lessons pay the consequences for a life-time. I find it rather interesting how some smart bankers, doctors and accountants who earned excellent grades in school still struggle financially all of their lives! Some parents don't teach children about money because they think they shouldn't talk about money with children, don't have time, or think they don't have enough money. Parents should take time to teach children about money regardless of income and should start when children are young.
Parenting is not an easy job. A lot of challenges faced within parenting such as this subject are not readily available in a parenting manual. I looked all over the place for some book I could recommend on the subject but to no avail. Over 70% of the people I spoke to about this subject said that they had been taught nothing about money and investing by their parents. The challenge then, is to teach our kids about money while having no role models on which to base these teachings.
How can you assure that your children will know the value of a shilling, understand the importance of saving, and make financial decisions once they grown up to be adults? I was introduced to a well-read, intelligent man, Pastor Muriithi Wanjau from Mavuno Church who was kind enough to share his insights, which I thought make up the perfect manual for raising financially savvy kids.
So where should parents begin? The best place to start would be for both parents to discuss their values and determine how they will create an open environment for their children to discuss money. Issues such as how children should receive money, family values and attitudes about money, how to structure learning experiences for children, how to handle effects of advertising and peer pressure must be mapped out so that when they arise, both parents can deal with them in a consistent manner.
In Sharon M. Danes and Tammy Dunrud's publication, "Teaching Children Money Habits for Life", they maintain that teaching your children about money is more than preparing them for employment or teaching them to save some of the money they earn. It includes helping them understand the positive and negative meanings of money. For example, children need to learn that while it's nice to show someone love by buying a gift, it is just as important to show love through actions and words.
Children and parents should talk about their feelings, values, attitudes and beliefs about money. This helps children understand that conflict about money occurs and needs to be discussed in the family and that compromise is often necessary.
According to Pastor Muriithi, once your child begins to ask for things, usually candy or toys from a shop, he or she is ready to be taught about the value of the shilling. Most children would be about three years by this time. Take them shopping and let the child pay for one item. For children who are not yet going to school, separate coins into piles by size and discuss their value.
Children learn mainly through indirect teaching and by observation and example; a good idea that Pastor Muriithi shared with me was his way of teaching his child. He has 3 "piggy banks" or tins labeled "GOD" "ME" "SAVINGS" in which his six year old daughter puts in her coins once she's earned them doing some odd jobs. He finds ways of giving her little tasks around the house that she can do to earn some money, so that when she wants something she knows how much work she needs to do to be able to have enough to buy it.
How should children receive money? One of the contentious issues regarding money and kids is allowance. Some children may receive money by allowances, by parents doing it out upon request, as gifts on special occasions, or by earning it. Each family appears to have a unique financial solution, in deciding whether or not to use an allowance.
I however concur with Pastor Muriithi who feels that an allowance given on request or for free is not a good idea. Children need to learn that they will never earn something for nothing in life. They need to learn early how to find ways of making money and multiplying it. When a child is given money, they do not develop creativity as far as ways of making more. He gave me an example of his friends daughters who are both teenagers (16 and 18) and through odd jobs and investing, have both saved over KShs 150,000! How may young Kenyans in their late twenties have 150,000 just sitting in the bank?
I remember pressuring my parents, when I was younger, to give me an allowance because "all" my friends were receiving an allowance. My father however never budged! I know understand why.
"The most critical age of a child's growth and development is from 1 to 7 years. The next most critical years are up to 12 years. After 12 years of age, it is difficult to instill values in children" Pastor Muriithi
By the time a child can talk and begins to ask for things, parents can begin to work on concepts such as earning, spending and saving. Earning refers to how children receive money. Spending refers to the way children decide to use their money. Saving refers to money that the children set aside for some future use.
By getting your children to carry out some odd jobs and earning some money for it, you give them a sense of freedom and recognition. Earning also teaches financial independence, the value of work, work standards and habits, how to evaluate job alternatives and the relationship of money, time, skills and energy.
Spending teaches the difference and balance between wants and needs. It gives opportunities for comparing alternatives, enables children to make decisions and take responsibility for them as well as keeping records. Parents should let their children make mistakes and learn from the consequences.
Parents should make sure their children know they've made mistakes too. Let the child know that you can't afford to buy everything you want either. This could be brought out while window shopping together. It's a good idea to also explain the bigger picture too.
For instance, going to the movies doesn't just involve the price of a movie ticket, but fuel for the car, popcorn, time and energy. This will help them be more aware when making financial decisions. Communicate. It's important for parents to talk to their children about money. Include children in family financial discussions appropriate for their age. This helps them feel valued and tells them that money is not a taboo subject.
Saving shows a child how to get what they need. It teaches planning and the concept of delayed gratification. It also teaches the interrelationship of spending and earning. It also teaches the different purposes of planned and regular saving. For instance, a six year old would have short term savings for a specific want or need put into their "ME" tin/piggy bank and regular savings, which are long term put into their "SAVINGS" tin/piggy bank. The difference between the two should be explained to the child.
Help the child set up short-term savings goals and let them know how long it will take to save a particular amount. Keep praising and encouraging your children and motivate their saving by annually matching the amount the child saves. When your child is about 7 or 8 you could open a savings account at a financial institution that accommodates children. Go with them to open the account and explain interest and how the institution works.
As the child grows older, they need to be able to pay for more and more of their material needs such pocket money for school trips, and so on. You should also teach them the concepts of borrowing and sharing. Borrowing means that the money can be obtained for use in the present but must be paid back in the future with additional cost. Sharing means both the idea of sharing what we have with the less fortunate.
As you teach your children about money, remember to continually encourage and praise them rather than criticize and rebuke. Allow them to learn by making mistakes and through successes. One important thing you must remember is to be consistent. Consistency is the key to giving kids a healthy attitude about money. So however you formulate your plan, stick with it. And remember the pay-offs; not only will your kids know their way around a bank statement, one day, they'll be able to support you in your old age :)
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