13 Ways to Raise Money-Smart Kids

By Matthew Imerhion

Teaching your kids about money is just as important as teaching them sexuality education. As Jonathan Swift, a famous writer once said, a wise man should have money in his head, not in his heart.

We present 13 gold nuggets to help your child get the right headstart and perspective about money.

Nugget #1: Understanding it’s purpose

The concept of money can be introduced to children at the age of 5. This is about the same time this topic is introduced to them at school under the subject, Numeracy or Mathematics. Based on your child’s level of comprehension, explain the value of money in simple terms. Money is what we use to buy goods and services such as the food you eat, the clothes you wear and the toys that you play with.

Nugget #2: To Every Man, His worth

According to Dave Ramsey, co-author of the book, Smart Money, Smart Kids, “Teaching kids about money is never just about money.” From the age of 7, children can be taught on how to earn an income. This income is however dependent on what they have to offer. If they do not have anything to offer, they cannot get anything in return. Give them tasks that can enable them earn an allowance or get their special requests granted.

Nugget #3: Make Money 101

For teenagers between 13-19 years, this could be a holiday or vacation job, weekend errands, and extra house chores. Teach them that people have needs and are ready to pay money to have these needs met. Let them know that there are services of value they can offer other people.

Nugget#4: Time and Money

It’s almost impossible to teach financial wisdom without talking about time. Children should be taught that they have to sacrifice time and effort to get money.

Nugget #5: ‘B’ for Bank

They have to learn to earn money, spend some and save some. Teach them the wisdom in delayed gratification in terms of always saving a reasonable fraction of every income earned; teach them to save. Tell them stories of those rainy days when your savings had kept you warm and dry.

They should start getting to know the bank and what goes on in there. Draw parallels between their piggy bank and the real bank. Tell them why they should eventually take their money to the bank; for safe keeping and the multiplier effects.

Nugget #6: Kids Bank Too, You know?

Open an account for your kid, one they will have to run with you as co-signatory. Offer incentives for them to save more and longer. For instance, a certain percentage of their total savings as contribution from you for a specified period is sure to motivate your child to save more.

Nugget #7: Free To Decide

From age 7, teach your child to make financial decisions on their own; that means you have to loosen your control on their spending habits. Gone are the days when you would take the money gift Uncle Joe gave to Junior under the pretext of safe keeping. Junior has to learn by experience how to keep and spend his money. Let them make mistakes and be there to correct them, pointing out their oversight and the need for more reflective foresight.

Nugget #8: It’s A Goal!

It’s ironic but the truth is that freedom without restraints will breed oppressive beasts. In this context, the beast might be an insatiable need to get everything they want. That, my dear parent, is not wise or feasible. Teach the kids to make goals. They want a bike? Encourage them to save for it over the next few months. This is a good opportunity for you to offer that 50% contribution. If he hits a certain mark, he makes a pass to you. You make your contribution and pass the ball back. He heads for the mall, pays for his bike and it’s a goaaoooll!!!. His friends are going green with envy. He worked for it! He bought his bike and it wouldn’t have been possible without you.

Nugget #9: Needs & Wants

Now, he has bought his bike, he wants the new XBox. But he also has a passion for music, especially the guitar. Ask him which is more important to him. State the facts: he could always go over to his friends’ house or the arcade to play video games but nobody is going to give him their guitar to learn how to play. Watch him weigh the information, try to set his priority right and make a decision. Teach him that, ‘wants’ are things he could do without while ‘needs’ are things he cannot live without.

Nugget #10: Shopping Lists & Budgets

Get your child to write a list of refreshments they want, give them some money and tell them to go buy them. They will definitely come back to complain that they could not buy everything. If they already know the prices and are good with their maths, they will know before even leaving the house that the money is not enough. This is where you teach them the importance of writing a budget; an estimation of expected allowances and expenses over a period of time. Now they know how to use their knowledge of needs, wants, shopping lists and budgets to achieve their short and long term goals.

Nugget #11: Family Activities

Involve the kids in making a budget, paying the bills or buying that new washing machine or the refrigerator sometimes to enable them reason and teach vital lessons. Talk about issues in detail and ask them for their input. Why should the gas bill take precedence over the DSTV bill, their hospital bill over attending the next field trip at school or their school fee over renovating the house, for instance, these activities will further imprint financial sense into your child’s mind.

Nugget #12: Get Upgraded

You also need to get upgraded. You need to make sure you are financially wise before you can even attempt to talk to your kids about money matters. Some parents are good at writing restrictive allowances and budgets but they never teach the child how to make money. They might not even have any entrepreneurial sparks themselves, nor model saving or prudence, so, imagine the dilemma. Also, if you are extravagant, you will not be setting the right example. Work on your extravagance.

Nugget #13: Give to Receive

Yes, this really is not a scientific approach but it does work. It is a universal law that you sow what you reap; give generously and same will be done to you from expected and unexpected sources. Teach your kids, especially by example, to have a large heart and support worthy causes. This is not to say they should give to every Tom, Dick, and Harry irrespective of their resources, of course. They must apply wisdom.

Start talking to your little Bill Gates and Rich Bransons about money NOW! Time is money, don’t waste any more of it.