Teaching Children Financial Management: A Vital Life Skill

 

Teaching children financial management is an indispensable and essential life skill that can benefit them throughout their lives; enabling them to make informed decisions about money, develop healthy financial habits, and achieve financial stability. By commencing early, and using practical, engaging methods, parents and educators can help children develop a virile foundation in financial literacy. Why is it necessary to teach children financial management? It is because financial management skill:

1. Develops responsibility:

Teaching children financial management helps them understand the value of money and develop a sense of responsibility.

2. Encourages savings:

Encouraging children to save and invest money can help them develop long-term financial goals and a safety net for the future.

3. Promotes financial literacy:

Teaching children financial management helps them understand basic financial concepts such as budgeting, savings, and investing.

4. Prepares children for independence:

By teaching children financial independence and decision-making, it prepares them for financial autonomy and growth.

The practical ways of teaching children financial management include:

1. Starting early: 

Begin teaching children financial management right from the early age of their lives, using simple concepts and examples.

2. Using real-life examples: 

Use everyday life situations, such as shopping or saving for a goal, to illustrate financial concepts.

3. Encouraging savings:

Encourage children to save a portion of their allowance or earnings or any money given to them, and provide a safe place for them to keep their savings. As a parent, you can make a wooden savings box with a tiny opening to put the money into the box. The key to the box should be taken from the child and hid somewhere in the house by parents, or totally thrown away. This approach is intended to debar the child from gaining access to the money until a reasonable length of time, for example, three years or two years have passed without touching the money inside the savings box. The important thing is not the big amount of money in the box. It is to teach your children the skill of saving money against the rainy days! Teach your children that money is only useful when used for a useful purpose ...  Quad Erat Demonstratum (QED).

4. Teaching children budgeting:

Teach children how to budget and prioritize spending, using tools like a piggy bank, or a simple budgeting worksheet. Inculcating the good habit of budgeting into the children will save them from impulsive expenditures. If parents fail to teach children the art of budgeting and avoidance of reckless and impulsive expenditures, the children will grow up to become heavy foolish spenders even when there is no money. It means that, the children will be used to spending above their means, leading to fake lifestyles. Parents' inability to teach their children financial management will make them vulnerable to endless lives of borrowing and poverty. Henry Ford, the manufacturer of Ford vehicles, embarked on a business trip to London, wearing a worn-out coat. Upon getting to London, he asked for the cheapest hotel in the city. Unbeknownst to Ford, the receptionist whom he was making inquiry from knew him very well. While the receptionist was expecting Ford to demand for a luxurious state-of-the-art hotel that befits Ford's affluent status, Ford requested for the cheapest hotel in London. Under the receptionist spell of bewilderment, he openly though politely told Ford that he knew him. He went further to tell Ford that contrastive to his (Ford's) son who used to lodge in the costliest hotels of London and used exotic cars each time he visited, he was surprised that the man wanted to lodge in the cheapest hotel in London. Ford told him that he does not lead an extravagant life, neither was it his mantra or lifestyle to flaunt his wealth, or spend money to please anybody. Ford said that his money was for a good purpose; and that he cannot behave like his son who was always on a spending spree each time he visited London. One of the lessons drawn from Ford is that he attached value to his money and resources. 

Tell your children not to live above their means. It is a fool that does that. Some people are habitual to buying everything their eyes see once there is money at their disposal. They eat more than three times daily when they have money. They smoke and drink more than they used to smoke and drink because there is money in their pockets. They impulsively visit persons and places that they would not have visited if they had no money. They wantonly indulge into immeasurable degree of frivolous actions because they have money to spend. These loose conducts can lead to the loss of the whole money acquired by them. It can lead to drunkenness. It can lead to promiscuos living and its attendant consequences. It can lead to sicknesses and, possibly death. Permit me to use this anecdote to buttress the point that reckless and impulsive expenditures can lead to failures in all facets of life. In 1996, my colleague and I had an appointment with the military Governor of Nasarawa State, Nigeria. We boarded a Chisco Transport bus in Lagos and travelled to Abuja City (capital of Nigeria), intending to go to Lafia, Nasarawa State capital, Nigeria. At the garage in Lagos, my friend ate twice that early morning. After that, he bought two packets of Benson and Hedges, and began to smoke ceaselessly. Then, he drank one bottle of beer with one plate of chicken pepper soup. He bought a bottle of malt and drank too. He bought roasted fish and eggs and ate also. Of a truth, he persuaded me to eat with him. But, I refused. I was ashamed of his glutonny. Up till today, I have never seen any human being who ate what he ate in a couple of hours! I was not happy with him at all. I tried to call him to order but in futility. 

From Lagos to Abuja, he was sleeping throughout the journey. Upon getting to the hotel where we lodged, he started vomiting and stooling. I was not surprised when I saw what befell him because the law of cause and effect visited him. He visited the restroom regularly throughout that night. He also vomited severally that night. His intestines were nearly vomited. I was so scared that I had to inform the Hotel Management about it. He told them that he over-fed himself when we were on transit to Lafia. I left the hotel that night looking for antibiotics (anti-purgative) drugs to buy for him. To cut the long story short, he was so sick that he could not follow me to meet the Governor the next morning by 9.00am. He was not feeling fine till we returned to Lagos. If he had eaten moderately, nothing would have happened to him. His excessive glutonny was his ruin.

5. Discussing financial goals:

Disuss short-term and long-term financial goals with your children, and help them set achievable goals or targets. If parents feel that the children do not need financial management training now because they are not yet earning money, by the time they begin earning money, they would have become spoilt children living above their means. 

6. Modeling good behaviour:

According to Albert Bandura's Social Learning Theory, children learn by observing and imitating their parents and other people around them in their immediate environments. Therefore, it behooves parents to model prudent and sound financial management behaviours for their children to emulate. 

Find below the recommended strategies for teaching financial management to children:

1. Games and simulations:

Use games such as "The Stock Market Game" or "Budgeting Challenge", to teach children financial concepts in a fun and interactive way.

2. Real-world applications:

Use real-world applications, such as planning a trip or buying a car, to illustrate financial concepts and make them more relatable.

3. Storytelling:

Use stories or scenarios to teach financial lessons, making them more memorable and engaging for children.

4. Hands-on activities:

Engage children in hands-on activities, such as creating a budget or starting a small business, to teach financial management skills. 

In conclusion, teaching children financial management is a vital life skill that can tremendously benefit them from cradle to the end of their lives. By starting early, using practical and engaging methods, and modeling good behaviours, parents and educators can help children develop a virile foundation in financial literacy and prepare them for financial independence. By investing time and effort in teaching children financial management, we can collectively empower them to make informed decisions about money and achieve financial stability, setting them up for a brighter and firm financial future.

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