Teaching children to be money-wise

By Rachna Buxani, Counsellor, Delhi Private School, Sharjah 

Back in our own childhood days, we can all probably recall a time when our parents denied us a certain toy or a favorite treat while shopping. It was a very heartbreaking experience- after all we thought that our mommies and daddies have an unlimited supply of that green paper which they would give the nice lady at the check-out counter so that we could have whatever our heart desired. That was our perception of home finances at that age- Mommy or Daddy simply pulled out a magic piece of paper and we had a new toy or a pair of shoes.

As adults, we now know all too well that there is no magic behind a bank account and credit card. But to small children, we may still appear to be a combination of Santa Claus and a magic Genie who makes money appear out of thin air. How do you explain the truth about home finances to children? How do we make our kids responsible about handling money?

Like most life lessons we try to teach our kids, financial responsibility is based primarily on habits that lead to positive or negative results. The sooner you start building on healthy financial habits with your kids, the earlier they establish realistic thinking about money. For example; If Rohit spends all of his allowance four days before his next one is due, his "need" for the latest play station game will just have to wait. If, however, he has learned to save a portion of his previous allowance, the game can be his, due to his own long term planning.

It is never too early to start teaching children about responsibilities and money management. Starting as early as age five a child can be made responsible for very simple daily chores around the house. This will teach your child the important reality of life that one has to work in order to make money.  The chores can be such tasks as washing the dishes; folding the clothes; or making the bed. Whatever the chores are, make sure they are reasonable for your child to accomplish. The next step is to decide upon a daily allowance your child will receive upon completion of the chores.

Teach your child to manage his or her money by dividing it into three: for the future, for the present, and for giving. Have a small box or can for each of the above and decorate them according to what it will represent. The future box will represent savings for the future. Cover it with pictures representing his or her future goals like buying a guitar or music system.

The present-box is for anything that your child may want to buy immediately which is not in your budget for him or her. That should also be decorated according to current interests. Finally, explain to your child about the importance of giving. Talk about whom or which organization your child can help with that money or what gifts they can buy for someone in need. This box could be decorated to reflect the many ways of giving to others.

At the end of each week, your child will divide the money up into the three boxes. Once money has accumulated take your child to the bank and have him or her actually deposit money into a savings account. Allow your child to use the present-money wisely, and suggest ways he or she can spend the charity money.

Remember that the skills you teach your child today will pay off for years to come. Your child isn’t just learning to budget allowance; he’s learning to plan ahead and also how decisions impact each other. These are incredibly valuable skills that can be learned as early as three or four, and sharpened with years of use. Once the preliminary work is done in setting up a system of handling money, your child will follow through. Parental guidance will help your child become a responsible adult and will help him or her gain money management skills which will last a lifetime!!  

Rachna Buxani, with an M.Ed in School Counseling from Suffolk University in Boston and a B.A. in Psychology with a concentration in Child and Youth from Eastern Connecticut State University, USA has specialised in Middle and High School Counseling. Rachna's expertise is in assessment and management of problems related to adolescence. She would be regularly writing on parenting issues on womenone.org and would be providing answers to readers' queries related to it.