Good habits are ac­quired early so teach your teenager fi­nan­cial smarts

The National - News - - BUSINESS | MONEY - SHAHEBAZ KHAN and DANIELE LAVALLE Shahebaz Khan is Visa’s gen­eral man­ager for the UAE. Daniele Lavalle is the head of busi­ness de­vel­op­ment at Al Eti­had Credit Bureau

It is com­mon for par­ents in the UAE to give pocket money to their school-age chil­dren to pay for their lunch or other mi­nor ex­penses. They also sup­port their off­spring through their univer­sity stud­ies in the Emi­rates, mak­ing it rare for un­der­grad­u­ates to work or ap­ply for a stu­dent loan to fund their tu­ition fees and ex­penses – some­thing which is com­mon­place in other parts of the world. As a re­sult, stu­dents may not ap­pre­ci­ate the im­por­tance of fi­nan­cial dis­ci­pline un­til they grad­u­ate or leave home or, even worse, when they en­counter fi­nan­cial dif­fi­cul­ties.

A re­cent study by Visa found that 43 per cent of re­spon­dents in the UAE be­tween the age of 16 to 24 say they are not ready to man­age their own money, while 53 per cent be­lieve schools do not pre­pare them enough.

In­ter­est­ingly, 48 per cent be­lieve that fi­nan­cial in­sti­tu­tions should have an ad­vi­sory role when it comes to en­hanc­ing fi­nan­cial knowl­edge. So how can teenagers learn to man­age their fi­nances bet­ter?

As par­ents, we play an im­por­tant role in shap­ing our chil­dren’s fi­nan­cial be­hav­iour and at­ti­tude to­wards money. Many teenagers look up to their par­ents to set the right ex­am­ple when it comes to manag­ing fi­nances. While it might not be easy to dis­cuss money with your chil­dren, par­tic­u­larly as they ap­proach adult­hood, the skills re­quired to man­age their per­sonal fi­nances can be con­veyed early on. The idea is to get them to think be­yond their pocket money, about their fu­ture dreams and plans.

Get savvy about sav­ing

The Visa study in­di­cates that only 28 per cent of the re­spon­dents in the UAE would like to start or con­tinue sav­ing. This is sig­nif­i­cantly below the 80 per cent av­er­age in a re­cent sur­vey on the fi­nan­cial habits of youth in three Eu­ro­pean coun­tries. The key to suc­cess­ful sav­ing is mak­ing it a reg­u­lar habit: set­ting aside a cer­tain amount in a sav­ings ac­count.

It’s also im­por­tant to save money for a rainy day – for ex­am­ple, to cover un­ex­pected ex­penses such as a bro­ken lap­top. Par­ents can help their chil­dren cat­e­gorise their goals into short-term, medium-term or long-term, whether it’s a new phone, bike, a hol­i­day or some­thing much big­ger such as a car or a house.

Bud­get to de­ter­mine what you need ver­sus what you want

Teach your teenager how to cre­ate a bud­get and un­der­stand the dif­fer­ence be­tween some­thing you need to have and some­thing you want to have. Once your child un­der­stands how to dif­fer­en­ti­ate be­tween their needs and wants, they may be sur­prised how cer­tain cat­e­gories add up more than ex­pected.

Spend within your means

Show your child how to make smarter de­ci­sions when it comes to spend­ing and to think care­fully about pur­chases. Us­ing a bud­get and learn­ing to plan your pur­chases can make it eas­ier to save money.

Keep debt in check

It is key to teach your teen that bor­rowed money is not free money – it has to be paid back. For older chil­dren about to en­ter the work­force, par­ents must ex­plain how the amount they owe de­cides whether or not they qual­ify for fu­ture loans from fi­nan­cial in­sti­tu­tions.

For ex­am­ple, in the UAE, Al Eti­had Credit Bureau can track your credit his­tory to iden­tify how you have re­paid pre­vi­ous loans, credit card bal­ances and other obli­ga­tions such as tele­phone bills. This his­tory de­ter­mines your credit score. If your credit score is lower, you may have to pay a higher in­ter­est on your loans. To ac­cess a credit re­port, sim­ply down­load the AECB app.

Keep your money safe

The eas­i­est way to pro­tect hard-earned cash is to keep it in a safe place. Banks of­fer spe­cific ac­counts for young peo­ple. Equally, just as they shouldn’t leave money where it could be lost or stolen, pro­tect­ing fi­nan­cial in­for­ma­tion on­line is just as im­por­tant. Teenagers are of­ten dig­i­tally savvy, so ex­plain that they can ac­cess in­for­ma­tion on­line – but with that ac­cess comes re­spon­si­bil­ity.

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