Teach your children money management

Nov 20, 2007

TEACH your children the responsibilities of money and sound personal finances. You can use savings to teach responsibility, self-reliance, and how to save and reach personal financial success early in life.<br>

TEACH your children the responsibilities of money and sound personal finances. You can use savings to teach responsibility, self-reliance, and how to save and reach personal financial success early in life.

No doubt you've heard people express that they want their children to develop a strong work ethic, acquire "money" knowledge and lead productive, meaningful lives.

However, since many of these people are so much better off financially than their parents were , they find it difficult in these affluent times to instil solid financial values in their children.
The best way to inculcate a saving habit in your child is to start at a very young age.

Most parents do not discuss money matters with their children. Lack of time or awareness could be possible reasons. Others do not want to burden their children with financial issues.

As a result, children often grow up without any understanding of the importance of financial management. It is important that both husband and wife represent the same financial values so that the child is not confused.

Young children are very impressionable and pick up many habits from their parents. If parents are not careful about how they spend or save, the children will not be either.

It is important to teach children that much as parents are there to take care of their needs, they too have to earn a living and manage their expenses.

The easiest way to do this is by fixing allowances for your children after discussing their needs and expenses. In fact, you could create the 'limited expenditure atmosphere' by announcing a budget for yourself for the week and living within it.

Saving
The habit of saving can be encouraged from a very young age. Invest in a piggy bank for your child and give them a coin every day to save in it.

Teach them delayed gratification by urging them to save for that toy they want.When the piggy bank is full, empty it and go with your child to purchase that toy. I am sure they will take care of it better than other possessions.

With older children, you can open a child savings account for them in your bank. Encourage them to save their allowance by giving them an amount that covers agreed expenses and extra money for savings. Through your guidance and patient handling will they learn to save.

Budgeting
The basics of economics start with 'Desire versus Demand''. Similarly children should be taught that wants are unlimited but resources are limited. Thus expenses should be budgeted by first taking care of needs and then the wants.

To achieve this, you should involve them in the monthly family budget planning. Make a list of expenses that are 'Must Buys' then discuss the wants you can afford to fulfil.

The family budget should also include children's allowances to make them feel important and responsible.You should also take children shopping for the family with the shopping list and budgeted amount.

Teach them to compare prices and as they grow up, include quality judgement along the lines of utility over different products.

This will help them make informed and responsible purchases and help overcome impulsive buying and counter the effects of advertising and peer pressure on their spending habits.

We should arm today’s youth with information and tools necessary to make informed financial decisions. Our economic future depends upon improving the financial literacy level of all Ugandans.

The writer is the PRO of FINCA Uganda

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