How to raise financially disciplined children
We’re living in a world of hyper-consumerism and financial discipline is quickly becoming a rare quality. How then are we supposed to avoid raising entitled children, who don’t know the first thing about financial responsibility?
What is the best way to teach your kids the value of money? Should you sit down for a lecture on money, or look for opportune moments to teach them real life financial lessons? The Souqalmal.com team helps you figure out which lessons to prioritise and how to make sure these stay etched in your kids’ minds.
‘stuff’ costs money and money doesn’t grow on trees
It’s important to teach your kids that money is finite and it takes time and effort to earn it. Especially if you have younger kids, it’s best to start talking to them about money from an early age. Give your own example to show how you have to work X number of days to earn Y amount of money.
This is also a good time to introduce the concept of ‘needs’ and ‘wants’. Tell them what items fall under each category and how a limited amount of money is first used to pay for what the family needs, and whatever’s left over can be used for to pay for the ‘wants’.
delayed gratification — Longer the wait, bigger the reward
Ever heard about the ‘Marshmallow Test’? This iconic test was designed by psychologist Walter Mischel to test self-control among preschoolers. By placing one marshmallow each in front of the four-year-olds, and giving them the option to eat it right away or waiting for an extra 15 minutes to get an extra treat, this test became a classic self-control assessment technique. The same concept could also be applied to financial discipline.
By teaching your kids that waiting can yield bigger rewards, you automatically set a strong foundation for them to appreciate the benefits of saving more and spending wisely.
demonstrate the practical benefits of budgeting and saving
As a parent, it’s best to look out for ‘teachable moments’ to help your kids acquire some practical money skills. For instance, you could take your kids grocery shopping and give them a list of five items each and a limited budget. Encourage them to compare prices before dropping the items in the shopping cart. This will teach them how to manage a finite amount of money in the best way possible.
Similarly, you can share the monthly water and electricity bill with the kids, and help them figure out creative ways to cut these costs. This will also help them associate consumption with cost.
set goals and achieve them together
The best lessons are taught by example. If you want your child to grow up to be a financially responsible adult, you must teach him or her how to set financial goals and more importantly, how to patiently work towards achieving these goals.
For example, if your child wants to buy a new bicycle, how about you both sit together and plan how to save for it. You could encourage your child to save a portion of his allowance and put that money towards a ‘bike fund’ every month. As an incentive, you can match that amount and add it to the bike fund as well. So the more your child saves, the higher the amount you’ll pitch in, and the sooner the goal can be achieved.
Hands-on experience — How to manage actual money
Want your kids to learn the value of money — what could be better than teaching them how to handle real money? You can give your kids a small amount of money in allowances every week or every month, and encourage them to independently handle their limited finances. Not only will they learn to be responsible about money, but they’ll also take back some valuable lessons about saving, spending and consequences of the financial choices they make.
You could also consider opening a children’s savings account for them. These accounts are specifically designed for being used by minors, under the supervision of parents. There are plenty of options available in the UAE. Many UAE banks also offer additional benefits like prepaid cards or cards only for balance inquiry, welcome gifts like savings boxes and dedicated websites featuring interactive learning activities about money management.