Teaching your children how to handle money from an early age

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Children can earn money from house chores and be taught to save in piggy banks. Photo/FILE 

By ISABELLA MUKUMU, imukumu@ke.nationmedia.com

Posted  Thursday, May 22  2014 at  17:42

In Summary

• How you are successful later in life can be traced to the early money lessons instilled by parents.

Warren Buffett once said that some of the money problems in adult life are brought about by little or no lessons on money during childhood.

He came up with a club that holds seasonal events to enlighten and mentor children on finances, good governance and how to earn money.

In The Secret Millionaires club, Buffett shares money advice with kids, teaching them sound financial habits and how to be successful later when they are adults.

A study questioning how to predict business success later in life, showed that the age you started your first business impacted on how successful you were later in life.

His advice is that parenting should also include teaching your children how to handle, spend and manage money properly.

“Teaching children how to spend as well as save money should be part of children’s training at an early age,” he says, adding that enrolling them in financial literacy programmes should be encouraged.

Buffett, who got money experience at six years, attributes his success to the constant training he got on how to save from his parents.

He says that one of the most valuable gifts you can give your children is teaching them good money management skills at home as it is where they get lifelong skills.

In Kenya, established entrepreneurs Vimal Shah and Manu Chandaria will host young multi-millionaires under 35 years at an economic conference next month to hone their skills in business. The conference, which will be the first of its kind, hopes to offer mentorship and advice on funding opportunities for startups to the youth.

Most of these entrepreneurs did not get the basics on how to run a business while growing up, which is their main concern.

The need to equip them with skills on money, finance and management is an important aspect that they should acquire. It is not an easy job and the skills can take years to instill, but the benefits can be immeasurable.

There are practical ways on how you can help your children develop the appreciation for the importance of good sound money management.

Whether they are in kindergarten, the best time to teach them is as early as three or four years when they have the basic understanding that money can get them something they want.

Family business

It is the old fashioned and traditional way of equipping your children with the importance of working together and earning some money.

Another way is to involve them in the family business at an early age, teach them the essence of getting a profit during a sale and how to plough back the money into the business.

Insist that they have to work for their allowances by giving them chores to do in the house such as washing the car or the dishes.

In these ways, they learn that one has to work to earn. Rewarding them is also an important factor since it teaches them that there is value addition in saving through getting an interest.

Children are fast learners and can pick up business skills very early in life so encouraging them to start their small business of selling snacks or toys during school and community fun days is a good start to running a business.

The habit of giving should be equipped in the child; this can be done by involving them in volunteer work. This will enable them understand that some people have more than others, and that those with more can help those with less.

Savings

Some of the activities one can involve children in are saving money in piggy banks at home and depositing the savings in a children’s bank account when it is full.

This can be done by doubling the amount of money they save in their piggy bank every month to encourage the saving. Setting money goals with them is important; agree on long term or short term goals for some of the toys they want.

Games

Involving themselves in extracurricular activities in schools helps build their confidence and also gives them the freedom to engage in other helpful activities.

Making it fun for the children will make them participate more and you can also join in the teachings as you will be able to point them to the correct ways.

A game of Monopoly is a fun way of teaching young children the essence of money and how to issue out change during a transaction.

Let them also try some of the online games that teach money skills such as Money & Stuff and Fat cat.
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