It is crucial to have financial intelligence early to achieve economic success. You must empower your children with financial literacy to help them navigate financial challenges as they mature, writes OLASUNKANMI AKINLOTAN
In Nigeria, many dropped out of school because they had wrong teachings or experiences with money at a much-tendered age. Most of them abandoned school because of their aggressive chase of money, exchanging the time to equip themselves with the time to start putting to bear what has been learnt.
Many do not see the need to teach children financial intelligence because they believe they are too young to be introduced to such a sensitive issue. They posit that only adults should deal with anything money.
Talking about money to your kids should not be complicated; it is one of the most important gifts you can give them.
Teaching children about money can easily be integrated into daily family activities. Teachable moments are a parent’s best friend. Shopping, planning a trip or going to the bank are opportunities to introduce financial concepts, explain the difference between needs and wants, and talk about savings, spending, and budgeting with your kids.
A simple question or comment about something they see every day can open the door to a much bigger conversation.
And remember to always lead by example. Kids are very observant, and pick up cues from your behaviour! So, make sure you are financially responsible as well.
Financial literacy is a lifelong skill that empowers individuals to make informed decisions about their money. Here’s a guide on introducing financial concepts to your kids at different age levels.
Building blocks
From age three to five, children are beginning to understand the world around them. This is a great time to introduce basic concepts, like spending, saving, and sharing. Remember what children learn at a tender age stays with them and is a veritable tool for their decisions in life since these are what they grow up to find in themselves.
The first step for this age range is:
Spending
Let your children choose between a few small items at the store. This helps them understand the concept of making choices and the idea that they cannot have everything.
Savings
At the initial stage, Introduce a piggy bank or small savings jar. Explain that saving money is like planting a seed — it grows over time.
Sharing
Encourage your child to share their toys or snacks with others. This fosters a sense of generosity and empathy.
Saving and earning
As children grow to ages 6–8, they start to understand the concept of earning money. This is a great time to introduce allowance and chores.
Allowance
Give your child a small allowance for completing chores or helping around the house. This teaches them the value of work and earning money.
Saving goals
Help your child set small saving goals, such as buying a toy or saving for a special occasion. This teaches them the importance of planning and delayed gratification.
Needs vs wants
Explain the difference between needs (food, shelter or clothing) and wants (toys, games or electronics). This helps them prioritize spending.
Budgeting and banking
At ages 9–12, children can start to learn about budgeting and basic banking concepts.
Budgeting
Introduce the concept of budgeting by helping your child create a simple spending plan. This teaches them to allocate money for different categories like savings, spending, and sharing.
Banking
Open a savings account for your child and explain how banks work. Encourage them to save a portion of their allowance or earnings.
Charity
Discuss the importance of giving back to the community. Encourage your child to donate a portion of their allowance to a cause they care about.
Investing and debt management
As teenagers become more independent, it is important to discuss more complex financial topics.
Investing
Introduce the concept of investing and explain how it can help grow money over time. Discuss different investment options, such as stocks, bonds, and mutual funds.
Debt management
Explain how interest works and the consequences of not paying bills on time.
Financial goals
Encourage your teenager to set long-term financial goals, such as buying shoes, and clothes, among others, or maybe buying a car. Help them create a plan to achieve these goals.
However, to ensure that this process does not get boring to them, you must ensure that it is fun and engaging to them. To make learning about money enjoyable, incorporate games, activities, and real-life examples into your teaching. Here are some ideas:
Play store
Create a pretend store at home where your child can buy and sell items using play money.
Family finance meetings
Discuss your family’s finances in an age-appropriate way. This helps children understand the challenges and rewards of financial management.
Financial literacy apps and games
There are many educational apps and games available that can teach children about money in a fun and interactive way.
Discuss the economy
It is important to keep your child informed of what is happening in the economy. Explain what you are doing now to adjust for inflation, which all comes back to budgeting. Understanding the basics of how news moments and the global economy impact personal finances will help them in the long run.
Remember, consistency is key when teaching your children about money. By starting early and reinforcing financial concepts throughout their lives, you can help them develop a strong foundation for financial success.
Additional Tips:
Lead by example
Children learn by watching their parents. Demonstrate responsible financial behaviour in your own life. If you are extravagant, your children are likely to also be spendthrifts.
Be patient
Teaching financial literacy takes time. Don’t expect your children to grasp everything immediately. No matter how silly their questions may sound, take your time to respond to them.
Make it relevant
Connect financial concepts to your children’s interests and everyday life. Make it real to them as much as possible.
Encourage questions
Create an open and supportive environment where your children feel comfortable asking questions about money.
By following these guidelines and fostering a positive attitude towards money, you can equip your children with the knowledge and skills they need to make sound financial decisions throughout their lives.
However, depending on the peculiarity of your child, your processes might be tilted mildly towards what he/she finds fun. While some children like travelling and tourism, many children like video games and football.
It is important to hinge on what a child likes in your process of training him/her to become a financially literate individual in the end.
However, from bankers’ lenses, it was agreed that raising children is undeniably one of life’s most rewarding experiences, but it also comes with its fair share of challenges. Among these challenges, ensuring a secure financial future for your children ranks high on the list. Many find the prospect daunting, but with the right approach, financial planning for your children can be manageable and even empowering.
One of Nigeria’s commercial banks, through its website, stressed how parents or intending parents can plan for their children’s future with confidence. The financial institution highlighted four key points in ensuring a successful financial plan for children.
These instructive guidelines include starting immediately, defining your goals, exploring investment options and involving your child.
Starting immediately
The earlier one begins planning and saving for a child’s future, the better. To commence, parents must assess their current financial situation and strategies on how to grow financially to save effectively for their children.
For parents who are already feeling uncertain about the best way to plan for their child’s future, seek advice from a financial advisor. They can offer personalised guidance based on your family’s unique circumstances.
Define your goals
Clearly outline your financial aspirations for your children’s future. Whether it is funding their education, assisting with their first home purchase, or supporting their entrepreneurial endeavours, having specific goals will inform your savings strategy.
Create a budget and save along that line. Calculate your family’s income and craft a budget that allows for regular contributions to your child’s savings account while trimming unnecessary expenses. If you have not opened a savings account for your child yet, consider visiting the nearest bank to open a future savings account. Set up automatic transfers from your account to your children’s account.
Explore investment options
Recognise that saving alone may not suffice. Investigate various investment opportunities like stocks, bonds, mutual funds, and college savings plans to bolster your child’s financial security. If you are cautious about investing, explore low-risk options such as real estate or diversify your investments to minimise risk while maximising returns.
Involve your child
As your child matures, include them in conversations about financial planning and savings. Educate them on the importance of saving, budgeting, and making sound financial choices. Lead by example by demonstrating good money management habits in front of them. By practising financial responsibility, you will effectively impart valuable lessons to your child.
All parents and yet-t-be parents must immediately begin planning for their child’s future. Every contribution made today can have a significant impact on the time of need tomorrow.
