Teaching Children Money Management

HANDS-ON EXPERIENCE

Managers are made not born. That is why it is necessary for parents to give their children hands-on experience. Children’s experience can include getting involved in the way their parents manage their money. Before the age of five or six, children have difficulty understanding the relative value of money. Give them a choice between a $10 and $5, and they would likely choose the $10, it is appealing to their senses. Also, they have little or no concept of planning ahead, an essential element in the process of managing money. By the time children get to grow up, they usually know that $10 will buy more than $5, what they need are experiences to help them make life-style choices about quality and quantity and planning beyond the present moment.

With young children, arrange for them to shop on their own, the small personal items you normally buy for them. Suppose a six year old needs two or three items for school. On entering the store with your child, determine how much the item will cost. Give your children enough money to pay for the purchase, guide his or her choice of the right quantities by explaining the quantity price difference, and then let the children pay for the items. There are least three immediate values of benefit to planned shopping with children. It teaches them the money is to be exchanged for what people needs. Guiding young children shopping helps them to make wise decision about quantity and later about quality. The first experiences help develop the third, that of learning to plan ahead. By age eight or nine, children can usually manage a small allowance received once or twice per week. Allowances are an excellent ways to give children hand-on experience in managing money without much investment or risk-taking. The basic principle for providing a child an allowance to manage is freedom. An allowance should be for child to manage. Parents can establish the ground rules at the beginning, and what necessary expenses are to be expected from the allowance. But for a child to learn money management there must be freedom to make mistakes. It is generally accepted that child guidance should be all encompassing. A child should be taught moral values, economic values and formation of good habits. Of all these, the most neglected by parents is the teaching of economic values, which includes money management. Yet it is very important. Many have failed in business and in life generally because they were not taught how to develop and maintain a disciplined art of spending and the science of savings and investment.

Therefore, a child should be taught the following about money management:

1.      Guide your child to have the right attitude about money to see it for it is, a means of exchange. It ought not to occupy his heart.

2.      Children must learn how to earn money while still at home. They can do this through holiday jobs and special assignments given by adults for which they should be financially rewarded. No one is capable of spending money wisely who has never earned money. Always getting something for nothing prompts irresponsibility.

3.      Teach your children to spend money wisely.

4.      Teach your children how to save.

Most recently, many of our children roam the streets during holiday while they wait for admission into higher institutions or they wait for their National Youth Service call or even admission into Law School. They should engage their hands in doing something useful or learning a trade, sewing, baking, panting, sign writing, carpentry, photography, computer operation, selling, public speaking, drama, etc. You never know how, who God will use such to bless in the future.

The value of the parent’s guidance in developing good money management practices in their children has been referred to several times; it is absolutely necessary. In reality, there is a prior step that informs parent’s guidance as analyzed above.