By Nur Choudhury
Educating your children about money management and making wise and informed decisions regarding their finances may seem daunting, but it is a vitally important skill that will help them throughout their lives. If you start early, by the time your child leaves home they will know how to make, manage, and save their own money. This will give them a wiser worldview regarding money and wealth.
According to Beth Kobliner, author of the New York Times bestseller Get a Financial Life, young children can grasp financial concepts such as spending and saving. Research has also shown that the financial habits of children are formed by age seven. Here are some practical tips to help you start your child on the right financial path.
1. Teach them the concept of value
Teach your children the concept of value and that things cost money. You can do this by showing them creatively. For example, when at the supermarket, you can give your child £5 and let them budget with it. It can be a great way for them to learn to prioritise needs over wants and also practice some maths in the process.
2. Give them opportunities to earn extra
Food, shelter, and clothing are all from the rights of a child that they should not have to earn or pay for. This also extends to education and learning tools. However, beyond this, it can be helpful to let children contribute for an extra allowance or earnings. It could be argued that children shouldn’t have to “work” for pocket money, however, it is also reasonable to expect them to shoulder a little responsibility towards the running of the household.
As a family, you can make up values for household chores, allowing a child to earn extra pocket money depending on how or what they complete. This should, however, be beyond basic responsibilities such as cleaning up after themselves and keeping their rooms tidy which should be expected of them. Extra chores such as cleaning the dishes or taking out the rubbish could be points of earning more and maybe opportunities for teaching your child the concept of paid work.
3. Teaching altruism
It is important to teach children that spending is not the only thing you can do with money. It is important to teach them to split money three ways: saving, spending, and giving. Having a saving pot with three segments can help achieve this. They can spend on current needs, save for the future, and donate to those less fortunate. In a world that is becoming more and more self-absorbed, teaching children to think of others is greatly important. The Prophet Muhammad (peace be upon him) said: “Charity does not diminish wealth” (Sahih Muslim). We should bring up our children to believe that the money they give away is in reality collecting a balance for them in the hereafter. Indeed, charity multiplies wealth and brings more blessings.
Childhood educator Esther Wojcicki talks about how teaching children to be kind is the key ingredient in raising successful children. Altruism is, in fact, a path to happiness since people who engage in charitable work often enjoy the best mental health. Generosity is also in many ways a learned habit, and your child will benefit from developing this habit early.
4. Teach them that money isn’t everything
We live in a world that values the material. Teenagers especially can develop a mindset where they compare their possessions and allowances with those of their friends. Social pressure can be incredibly stressful for your child and they may feel that having what their peers have will make their lives better and easier. Whether that is cars, phones, computers, or clothes, in a capitalist society, it can never seem enough. Thus, the greatest possession you can ever give your kids is teaching them gratitude. Gratitude for everything they have, for the blessings of their faculties and senses, for their family, for the roof over their heads, and for the food on their plates. Teach them to always have their gaze on those who have less than them and not those who appear to have more.
5. Encourage entrepreneurial ventures
During his early life, the Prophet Muhammad (peace be upon him) embarked on trading journeys where he engaged in buying and selling. It is considered a noble trade that brings about self-sufficiency and independence. Learning a trade and working with one’s hands is also honourable.
In home education circles there are ample examples of teens under the age of 18 who have embarked on business ventures successfully and have, for example, published books or started businesses building tables or furniture. This is because their parents have helped them discover their skills and allowed them to develop them. While school may have benefits, sometimes your child can become lost in the crowd and their unique capabilities may go unnoticed. As a parent you should help your child discover their hidden talents and how to make the best use of them. This can be the case for very young children who can also sometimes have an aptitude for much more than what we give them credit for.
You can also help older children build their CVs and help them look for a job. Working while studying will help them be responsible and take ownership of their education. This in turn will help them take it more seriously.
6. Teach them to spend within their means
Debt is crippling. Ultimately, the credit card industry is built on making people feel like they don’t have enough and that it is okay to live beyond their means. Credit cards also carry interest fees and this is also forbidden to engage in. We should teach children the pitfalls of living in debt, how it is a burden, and that interest will only bring ruin. One should only spend the money one has, and this is ultimately a freeing principle to live by.
The concept of bartering is also valuable and has ultimately been lost in today’s day and age. We should teach children that if they ever do not have enough money, they can barter with their skills or by exchanging goods. Traditional societies were very successful in this and it was a great way of ensuring people did not need to borrow money or get into debt, since there was always a way they could pay back without money in times of need.
If there is one thing that is lacking in the education system today, it is the teaching of life skills such as money management. Since all of the runnings of modern life depend on money, it could be considered to be a great flaw. For this reason, it is up to parents to step up and fill this gap. Moreover, teaching children to invest in their skills and encouraging them in their business ventures will make them confident and happy. In addition, demonstrating money management to children and the concepts of saving, spending, and donating from a young age will help them become well rounded and independent individuals who not only plan for their futures but also are focused on giving back to their communities. A child who learns to live within his or her own means will also be free from debt and will develop the ability to be grateful for what they have. It is this which is ultimately the path to contentment and happiness