The majority of us don’t manage money as well as we should, and this is largely because of how we were raised to handle money. Life’s quality and experiences are impacted by money or the lack of it. The type of food we eat, and hence our health, family vacations, our neighborhood, the type of schools kids attend, and future investment are largely determined by our income levels. If money is a crucial tool, why Is it not taught in school? Not the hypothetical financial statements we prepare in business class for learning and testing purposes but earning, negotiating, budgeting among competing needs, and increasing our savings using the regulated opportunity sets that are readily available.
Enough of us grew up in homes where discussing money was in murky tones or getting into heated debates whenever a replacement or a large payment was to be done. As adults, we can intentionally relearn all our ingrained programming about money management by attending financial literary lessons or consulting with investment advisors. Additionally, we can improve and begin educating children about the worth and importance of money. when I asked a few kids about money, their responses were varied and fascinating. One told me it grows in her mom’s purse, another claimed it bought him candy, and several others informed me that money is what you get paid for labor.
I have discovered a few genuine educational moments for parent-child conversation that can be used to broach the practicality of money.
Household chores for pay – I preferred to spend most of my days either playing with my friends or watching cartoons, but I was incentivized to help around the house and I got an allowance at the end of the week, which allowed me to purchase the choice of sweets and my preferred toys. The compensation system perpetuates the idea that work should be rewarded financially.
Every trip to the local duka or shopping center presents an opportunity to teach kids about money as they exchange fiat currency for airtime, milk, or bread. They realize that in an orderly transaction between market participants, everyone gets something of value and that nothing not even the sweets the shopkeeper offers as a freebie, can be obtained for nothing.
If the entrepreneurship bug bites your children, encourage them on the journey. Even though businesses run by kids don’t have a going concern as a problem, the majority of the lessons learned will be useful in the future. A few of the world’s most impactful business leaders and entrepreneurs track their success back to their early years and the blessing of having supportive parents.
When family members openly discuss money as they would any other subject, it becomes more familiar and less foreign. Adult members can openly share how they earn their daily wages, divide up income among various needs, and allow the children to participate in future investment plans by plugging in their ideas or as a learning process.
Parents can introduce the various taxes the government imposes on income paid to employees, companies, investment income, and VAT on basic consumer goods and how they impact the spending power of different parties.
The most practical method to teach kids about money, according to a friend, is to let kids save up and buy their favorite cake and proceed to keep a third pie. It is unpleasant but true.
Banks have responded to the banking needs of minors by establishing Junior banking accounts. The most powerful results of any compounding are delayed, and additional time is a commodity youngsters have in abundance. Both children and parents can contribute to the account for future expenses, such as college, and take advantage of compound interest.
By doing better, we empower the next generation to keep what we hand them and be stewards of their finances.
MA Financial Services Consultants