Teaching kids’ good money habits

Lessons you could teach your children about money according to their age group.

A parent’s guide to teaching your kids about money

What we are about to teach you is probably not entirely new to you. We highlight a few of the most important lessons you could teach your children about money according to their age group. There are also online resources to teach kids of various age groups about money, saving and investing.

Children aged 3-6 years

  • As soon as a child can count, introduce them to money and talk about it.
  • We live in a digital age, but when your child starts learning about money, give them a coin or note in hand so that they can conceptualise it. Help your child identify the value of the different coins and notes.
  • Introduce them to the concept of pocket money and give them control over it. Let them experiment.
  • Let them save it. Let them give it to someone else. Let them buy something they enjoy. Let them buy something that they might regret.
  • Plant the seed of setting goals and timelines by explaining to your child they may have to wait to buy something they want.

Children aged 7-10 years

  • Teach them to make informed choices about how and where they spend their money.
  • Shop around and compare prices before you buy.
  • Ensure that your child knows how to present enough money to cover purchases and count their change.
  • Explain how money is earned and accumulated, whether it be from a salary, owning your own business, earning rental income, prize money or inheritance.
  • Draw up a very basic budget to teach them concepts like income, expenses and profit/losses.
  • Even if it’s only a small sum of money, teach them about giving to worthy causes. As we are blessed, so should we bless others.

Children aged 11-13 years

  • Saving up for a wanted item is not the same as saving for the long term.
  • The sooner you start saving the faster your money starts growing.
  • Do not lend your child money to purchase an item. Delayed gratification and saving up to buy something of value teaches them tenacity and persistency. I have personally found that delaying a purchase often results in a reassessment of needs and wants, and then eventually leads to a change of mind.

Children aged 14-18 years

  • Teach them to manage their own money by giving them the responsibility to cover certain expenses from their pocket money like data, social activities, or fast food.
  • Using a credit card is like taking out a loan; if you do not pay your bill in full each month you will be charged interest and you owe more than you originally spent.
  • Teach them about different kinds of taxes. Your first salary may seem smaller than expected since taxes are deducted from your salary.
  • There are various ways of saving, and money in the bank is not a long-term investment strategy. Teach your kids about property, unit trusts, endowments, etc.
  • Re-enforce the concept of not spending money you don’t have – don’t buy on credit. This is probably the most important concept to teach.
  • Teach your kids about investments: Invest for the long term, stay the path.

Children aged 18 years and older

  • Introduce your child to the concept of a financial advisor. Make an appointment for them to meet your financial advisor and to listen to how you discuss your financial matters.
  • It’s essential to save at least six months’ worth of living expenses in case of an emergency.
  • The sooner you start saving for your retirement, the faster your money starts growing.
  • Save at least 15% of your salary when you start earning.
  • Draft a will.
  • A car is not an investment, it is an expense.
  • Start saving for a deposit to purchase a speculative property.

Like so many other aspects of parenthood, helping your children build strong, healthy money habits takes patience, time, and lots of repetition. We hope these guidelines will enable you and your kids to take flight on this journey of learning.

Financial success starts with good saving habits. Our Financial Experts have been unpacking and providing practical advice on the best ways to preserve YOUR financial freedom. Contact our Financial Advisors to ensure that you are receiving Shariah-Compliant Finance advice.

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Source: (Moneyweb, 2022)

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