With schools closed for the rest of the year, parents are looking for ways to keep their kids learning. As the primary educators, parents are taking advantage of this break to teach life skills. In my circle of friends, kids are now learning sewing, knitting, cooking, cleaning, washing, gardening, music, programming, research and presentation skills.
Money did not come up at first. The parents in the group were more hesitant to talk about money than they were about tackling trigonometry problems. The initial hesitation boiled down to 3 main reasons: not knowing enough about money, personal finances not being in order, and the fear of giving too much information causing their kids to worry or be entitled.
Whether you talk to them openly or not, your kids learn from you and others around them about money. As early as age 5, they are learning about money. What they see, hear, and experience will influence their relationship with money in the future. Here are a few beginner’s tips to help your child build a healthy relationship with money.
Start your lessons by familiarising your kids with the various denominations of the currency of the land. Whether you are at home or in the shop with them, allow your kids to interact with actual money. Ask them to identify coins and notes and what they can buy. One of my friends plays “shop” with her daughters, and at the ages of 5 and 7, they can identify the different denominations and have a vague idea of how much each denomination can buy.
Money can buy things
This lesson is about the value of money. The world we live in requires money for trade and access to goods and services. The more money you have, the more you can purchase, save, invest, or donate. As you teach your kids what money can buy, take the opportunity to formulate values. Talk to your child about integrity, earning an honest living, helping others, spending on experiences, and delayed gratification.
Money is finite
From the onset, children should learn that we do not always have enough money to buy everything we want, right this minute. Teach your kids about prioritisation, comparison shopping, and saving enough to buy the things they want or build a nest egg for the future. When your son asks you to purchase multiple items, ask him to choose one. You are teaching him to prioritise. At first, his choices may be down to preference or urgency, but with time, he will select based on price, need, and value.
You can also teach him about savings when you are not able to buy the item he wants immediately. Explain that you need to accumulate the money and you will be able to purchase it in a certain period. Asking him to wait also teaches delayed gratification. Other important topics to discuss are negotiation and bargaining, taking advantage of sales, and getting value for money.
Money is earned
I can’t count the number of times I’ve heard the phrase “money doesn’t grow on trees”. Your children already know money is earned because they see you going out to work every day. They are also interested in making their own money as evidenced when they say things like, “When I grow up, I will buy all the sweets I want”. So, how do your kids earn money?
You can start by giving your child an allowance. It could be unconditional or for specific use like lunch money. The critical thing is for your child to have some money, no matter the amount, from age 7, which they manage for themselves.
As they grow older, they can earn money by doing jobs inside and outside the home. Inside the home, assign chores outside of the routine tasks that keep the household running. Everyone plays a role in running the house, and you need to be careful not to turn every interaction into a transaction. For instance, please don’t pay for cleaning their rooms, taking out the trash, helping with cooking, setting the table, or washing dishes. You can, however, pay for non-routine chores like gardening, washing the car and tutoring their siblings.
Outside the home, your kids can take up jobs like babysitting, tutoring, or gardening. You could also start your teens on online jobs like transcribing or helping out in your business. Unlike the US and other developed countries, there aren’t too many options for formal part-time work in Kenya so you may have to be creative about creating employment for them. Having a job allows them to earn money and, in some cases, gives them some experience of the working world. For instance, during university, I supplemented my allowance by tutoring kids in French and managing the family business.
Money is stored
When your kids first start earning money, teach them how to store money. At age 7, you can use jars and piggy banks to store money. As they grow older, get bank accounts, prepaid cards, or digital wallets. It is vital that for this lesson, you let them keep their own money. My aunt “keeps” money for her kids, and it’s a family joke that they never see the money again. Part of managing money is having access to the money and not feeling compelled to spend it all at once. Progressively introduce topics like due diligence, theft, fraud, inflation and devaluation, and other ways of storing their money.
Spend, Save, and Share
Everyone knows that it is essential to save for a rainy day. Unfortunately, this is not an easy habit to build in adulthood. We always assume that we will have time to save, and then the unexpected happens to set us back. Start early and spare your kids from making the same mistakes we did. If your daughter learns to save a portion of her allowance or cash gifts, she will easily maintain the same habit when she gets her first salary, and is less likely to abide by the adage “tumia pesa ikuzoe”.
As we teach them to share toys, we also teach them the value and reward of helping. Every time your child makes money, set aside a portion to donate to the less fortunate or in support of causes that resonate with your kids. Sharing is caring!
People are always asking how much should go to spend, save and share? There are several ways to do this that are purely dependent on your circumstance. Give your child a financial goal to save towards like purchasing a toy or item of clothing and help them keep track of their progress. Another way to do this is to have a fixed amount for each pot. For instance, you could save 10%, donate 10%, and spend the rest. To avoid the pitfalls of spending money intended for savings or donations, maintain a separate “account” for each so that you can keep track of the money in each pot.
And because sticking to a financial plan is not easy, incentivise them by celebrating milestones or matching their savings or donations. By doing so, you are also teaching that money can work for them.
Record keeping is a fundamental skill when it comes to financial management. If you don’t know what you’re spending on, how can you plan? Start small and record cash in and out. You can then scale up to categorising spend in individual buckets and analyse your spending habits. There are several Apps to assist, but you can always start with a physical ledger.
Growing up, my younger brother was the best at managing money. With every allowance we got, he always saved a portion and still had a portion leftover to bail us out when we overspent. My younger sister, on the other hand, was from the “tumia pesa ikuzoee” school of thought. I was a cross between the two, but with age and various experiences, I’ve learnt to make a budget and stick to it. I have learnt the importance of an emergency fund.
Your budget lessons don’t have to be formal from the onset. Use practical life experiences to teach your children about budgets. When you take your kids out for the day, set a maximum spend and let them decide what to spend it on. Give lunch/break money as a lump sum and see how they manage it instead of giving them the cash daily. Use the grocery budget to teach about the cost of living, prioritisation, and comparison shopping.
Talking about money doesn’t have to be a daunting task. You don’t have to know everything, and it is a journey that will benefit you all. Remember to keep the lessons short and age-appropriate. The idea is to provide your kids with information and practical lessons without overwhelming them with information. Lastly, make it FUN, using live scenarios, games and Apps to augment the learning. I learnt quite a bit about money playing Monopoly, and I’ve heard rave reviews about online games like Cha-ching. Get your child started with the right financial foundation today!