When to Start
Most parents want to know when they should start teaching their kids the value of money. Dr. Rebecca Steingiesser, Clinical Psychologist and Clinical Neuropsychologist at The LightHouse Arabia Community Psychology Clinic asserts that parents can begin talking to their children about money by as early as age five. “It is generally recommended that as soon as a child can count and can demonstrate awareness that money buys things, parents can begin to take an active role in teaching them about money,” she explains. “Parents can start by helping to develop their child’s understanding of the difference between needs and wants; that money is earned from working, what money looks like, and that everybody has a job, even the child.” She advises that parents
demonstrate to their children that mom and dad go to work every day to earn money, yet the child also has a job which is to attend school and learn, to play and to participate in the family. “It is important for parents to highlight to their children that as they get older, these ‘jobs’ will slowly start to change and eventually they will hold jobs just like their parents do,” she says.
Also as children get older and begin to understand the value of currency; for example, the difference between one Dirham and 25 Fils, parents can begin talking to them about more complex concepts such as how credit cards work, explains Dr. Steingiesser. “Research suggests that children are able to learn about budgeting from age seven,” she says, therefore equipping children with a solid understanding of money will greatly benefit them in their futures.
Still it’s never too late to start and even teenagers can be taught effective ways and means of saving money “It is recommended that parents give their teenagers a consistent allowance,” she advises and for this, there are varying formulas that can help parents decide how much to give their adolescents and at what age to begin providing them with an allowance. “However it is not the amount that is the most important aspect of this decision but rather that parents give a recurring allowance at the same time every week or month,” she says and essentially having a regular allowance serves to provide children and teens with a feeling of security and something to look forward to that is inherently theirs, even when parents assign spending guidelines. Dr. Steingiesser strongly suggests that it is important that parents stand firm and let their teenagers experience what happens if they engage in irresponsible spending. “Furthermore, if parents ensure that they stick to the allotted amount, teenagers are less likely to request more funds,” she says. “It is recommended that movie outings with friends, birthday gifts for friends, snacks/eating out, magazines and most other ‘wants’ are covered by the allowance.”
Should money be used as a reward or as a treat? “It is important for children to realise that with effort comes reward, but also that a lack of effort brings a lack of reward,” says Dr. Steingiesser. “In a family household, there are expectations that every member should fulfil and while these responsibilities will vary from family to family, most families tend to expect a child to keep their room clean, tidy up after themselves and help with the dishes,” she says and these are fundamental tasks that parents do themselves and for which they do not receive financial reward. The same should apply to the child. “Adults do not receive payment for completing household tasks such as doing the dishes or making their bed,” she says so as such, if a child begins to expect to get paid for completing such tasks, this will serve to create false expectations and leads to the development of a false reward system. “However there are certainly times where providing a child with a financial reward is acceptable,” she says for example, if a child does extra chores or has achieved or accomplished above and beyond the average, then yes, a financial reward can be encouraging as well as rewarding. “Also it is recommended that parents avoid using money as a reward for achieving good grades at school,” she explains as there are a number of long term implications for parents to consider before rewarding good grades with money. “For example, once the child has proven they can earn good grades, will the parent keep paying?” she asks and if the rewards stop, will the child revert back to old study habits and return to his/her pattern of underachievement?
According to Dr. Steingiesser, a nationwide survey of high school students in the United States demonstrated that approximately 60 percent of the students surveyed indicated that they had learned about managing their money ‘at home from my family.’ “This statistic clearly demonstrates the important role parent’s play in developing their child’s awareness, understanding and appreciation of the use and handling of money,” she says. “Sharing is an important value to teach children and parents can develop their child’s sense of social ethics by engaging in charity or giving with them from a very early age.” Also parents can help their child to develop a sense of social responsibility by setting an example themselves and modelling charity. “For example, some families may wish to donate money to their religious organisations, put aside a certain amount of money every year to give charity or sponsor a child from a disadvantaged background,” she says as well as volunteering in the community and working to raise funds for the disadvantaged can be a rewarding experience for children. Parents can also encourage their children to donate old clothes, toys, time or even a percentage of their allowance to feel the individual impact of their contribution to the lives of others.
Tips for parents:
- Parents should be encouraged to communicate with their children as they grow about their values concerning money.
- Parents can begin by helping children learn the differences between needs, wants, and wishes. This will prepare them for making good spending decisions in the future.
- Setting goals is essential to learning the value of money and saving. Every toy or other item a child asks their parents for can be used as an object for a goal-setting exercise. Goal setting is an important first step for children to begin thinking of strategies of how to go about purchasing the item.
- It is important for parents to establish a regular time for family discussions about finances. This is especially helpful to younger children as it provides them an opportunity to tally up their savings and work out how much more they need to save to reach their target goal.
- Allow young people to make spending decisions, whether these be good or not. This will allow them to learn from their spending choices. Parents can then initiate an open discussion of spending pros and cons before more spending takes place.
The Don’ts of financial education:
- It is recommended that parents avoid ‘bailing’ their children out if they deplete their savings. Parents should establish that allowances are only given out once a month. It is important for teenagers to experience the consequences of poor budgeting, as this will help them understand the value of considerate money management.
- Parents should avoid giving their children cash. Cash can easily be lost or misplaced and is generally hard to account for. This may serve to encourage poor spending habits without proper accounting and responsibility.
- It is recommended that parents address issues as they arise. Waiting to discuss questionable spending decisions can lessen the impact of the money management lessons parents are trying to instil in their children.
- Parents who establish guidelines are able to avoid arguments about who is supposed to pay for what as clear definitions are made early on with regards to what they expect their child’s allowance to cover.