The elementary school years, when children are being introduced to mathematics concepts and coming to grips with numbers, are an excellent time to lay a solid foundation in personal financial management. However, our educational system focuses almost totally on academic subjects and very rarely is any aspect of money management taught in schools.
Global Money Week is a money awareness celebration that takes place in March each year to engage children all over the world regarding the basic concepts of savings and investing.
In a keynote address delivered at the Child and Youth Financial Literacy summit held last week at Abuja to mark Global Money Week, Godwin Emefiele, the CBN governor, urged the children to take advantage of the financial literacy program of the central bank to start planning their future from an early age.
The CBN in collaboration with the Federal Ministry of Education, the National Education Research Council, as well a financial literacy steering committee including stakeholders in the capital markets, banking, insurance, and pensions industries seeks to ensure that financial literacy is integrated into the Nigerian school curriculum to better equip students to manage their finances in adulthood.
Whilst the CBN and all stakeholders pursue these laudable objectives, there is a responsibility that falls upon parents to introduce their children to the fundamentals of personal finance from an early age to encourage them to be financially responsible adults.
If children develop some understanding and practical experience in spending, saving, banking and investing they are more likely to develop a responsible attitude towards money and can build a solid foundation for making sensible financial decisions in future.
Give them an allowance
A regular allowance or “pocket money” is often a child’s first experience with financial independence as it gives them a certain degree of control over their own money and teaches early lessons in budgeting, saving and prioritising purchases.
In deciding how much to give your child, consider what items an allowance should cover for their age, and what your family can afford. Naturally, a child should not have access to excessive sums of money. Guide and advise, but don’t dictate how the money should be saved or spent but encourage them to keep a record of how they are saving and spending their money; this will set the stage for budgeting.
Teach them to budget
Learning how to live within ones means is an important aspect of daily life and creating a budget is one of the best ways to achieve this. Sit down with your children and go over their wants and needs. What are they saving towards? How much can they afford? What gifts do they plan to buy? Build in some of their bills into their monthly budget such as the costs of maintaining their mobile phone.
Visit the market or grocery store with them and explain how you compare items based on price and quality. Talk about the purchases of the day, the way you select, and get value for money. Through commercials and peer pressure, children are constantly tempted to make impulsive purchases and will need guidance from you about how to make sound buying decisions.
Teach them to save
One of the simplest ways to encourage a responsible attitude about money is to encourage children to save. Little children get excited about their “piggy-bank”; this traditional first savings method helps to build initial interest. Today some piggy banks have various compartments for saving, spending, investing and giving; the child then decides where their money goes.
Naturally as children get older, and begin to save more deliberately, it is important to visit a bank with them to make a deposit into an account opened in their name. Many banks offer incentives and attractive savings account options tailored for children.
Invest for them
The stock market is generally regarded as the best option for long-term investing; in the shorter term it can be volatile. If your plan is to put money away for your child for a long time, say, five to ten years, then it is well worth considering investing in a stock market mutual fund.
These pooled investments give access to diversified portfolio thus spreading the risk. Although children cannot hold mutual funds in their own name before the age of 18, an adult can add the child’s name to the investment and sign on their behalf until they come of age.
Should you pay children for chores?
Chores offer an important lesson in cooperation, and develop in children a sense of responsibility as they live within their family community. Some parents pay their children for doing chores around the house whilst others prefer to give an allowance with no strings attached.
Try not to tie chores too stringently to allowances as this can make children feel that being paid for helping out at home is a right rather than a duty; some parents soon find themselves having to negotiate to get anything done! You do not want them developing the idea that they must be paid for everything. However, it makes sense to allow them to earn extra money for tasks that fall outside the usual household responsibilities and they benefit immensely from learning to earn.
Saving for financial goals
Encouraging children to set specific, measurable goals drives a sense of motivation. Help them to set modest, attainable savings goals. Over time, your child will learn to become a more disciplined saver and can save for longer term more expensive wants. Offering to match whatever your child saves towards a long-term goal can be a motivating factor to older children and spurs them into attaining a goal.
Write down each goal, and the amount that must be saved weekly, or monthly to reach it. This will help your child learn the difference between short-term and long-term goals and how best to save or invest to achieve this.
Teach them to give
Involve your children in your financial decisions regarding philanthropy and expose them to charitable giving early in their lives. Children can donate their outgrown toys, books and clothes and as they get older, can volunteer, giving of their time and talent.
These lessons teach them to become empathic adults who can make a positive impact on their community. This will go a long way to develop a more responsible, caring society as the younger generation begins to have a sense of appreciation for some of the experiences and luxuries that they enjoy and take for-granted.
Be a role model
Action speaks louder than words. Your children will learn about money values, primarily through your behaviour. If you display an ostentatious, materialistic outlook, this will become the example they may come to live by. The way you deal with money issues, from settling bills to making a large purchase are all-important lessons that will remain with them.
Too many of us look back on life and wish that we had started investing when we were young. Begin early in your children’s lives to instil in them the important building blocks of saving and investing and start them off in the right direction towards a secure financial future.
Nimi Akinkugbe has extensive experience in private wealth management. She seeks to empower people regarding their finances and offers frank, practical insights to create a greater awareness and understanding of personal finance.
