Financial intelligence for minors

Many of us regret that we did not learn better financial management skills at an early age, therefore, we must ensure that our children do not grow up with the same disadvantages.

Here are some useful tools for teaching younger children personal finance skills.

Weekly pocket money – If they do not have regular access to money how will they learn to manage it? The amount does not matter, we are trying to impart some values. Weekly pocket money is preferred to monthly, so that the lessons can be repeated 52 times a year instead of 12; remember, practice makes perfect. The pocket money comes with conditions: (1) They must give about 10% in religious offerings from the money – they need to learn to be unselfish with money and acknowledge the unseen hand of God in their prosperity. (2)They must save at least 10% from each week’s income (buy them piggy banks to put the savings into). This way they develop the savings habit early in life. A child who is unable to save for 3 consecutive weeks may be disciplined in any appropriate way including a withdrawal of the pocket money during the next week. (3)The child is now responsible for payments for her recreational/ snacks expenses. After all, to whom much is given, much is required. This reinforces the idea of financial responsibility. However, this is only up to a reasonable limit, of course – parents still pay for family outings and other reasonable exceptions. (4)Withdrawal from the Piggy Bank is discouraged, by the introduction of a prize to the highest saver (in percentage terms) in the family at the end of the year. This teaches that prudence has rewards. However, you may want to give consolation prizes too, so as to reduce crying in the house.

Bank savings account– Let the child use ONLY her own money to fund her savings account and watch it grow – savings from pocket money, cash gifts from extended family and family friends, salary from holiday jobs, dividends from investments etc. are sources of funds for her account. Involve the child in the account opening documentation and process. Remember; keep your own money out of this account.

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Small investments in child’s name – (e.g. FGN savings bond, shares in public companies etc.) Make investments in the name of the child and involve her in the decision making; explaining your Investment options and rationale for your final choices. This enables the child understand the basics of resource allocation and wealth creation.

Holiday Jobs – As soon as they are old enough (late teens) actively encourage them to work for a pay. Working for a pay underscores the value of money and teaches good work ethics. It has been observed that as soon as young adults begin to work for money they develop a different attitude to spending it.

Volunteering – They should also be encouraged to volunteer e.g. at orphanages, hospitals children’s wards, church crèches etc. This enables them to see the world as it really is and reinforces in them the need to give back to their society. Giving skills and money away without expecting anything in return, reduces greed and the desperate pursuit of money that has sadly become endemic in our society.

Children exposed to the above trainings make their money mistakes early. They learn what works and what does not in childhood and by the time they reach adulthood, they have mastered money management skills and are efficient managers of financial resources.

Some readers have children who are already in their early twenties and have begun exhibiting bad money habits. Encourage them to – read personal finance books; write budgets for the monthly stipends they receive and you monitor how well they stick to their budgets; save monthly; and more importantly to work and earn money during their holidays.

To demand standards from children we ourselves must exhibit them; so as not to appear as hypocrites and provoke the children to rebellion. Our commitment to financial prudence and responsibility must be visible and we must be open with your family – admit that in the past you had some bad money habits but now you’re committed to changing them and would like everyone to go on the journey together.