By elmads

A family is the basic unit of society. It is the place where children learn all of the fundamental aspects of life, such as culture and religion, which are taught by our first teacher, our parents.

A quick story about myself. My parents taught me a lot, and it certainly influenced the person who I am now, one of which is the importance to save money. When I was young, my mom and dad told me to always save money in order for me to buy toys that I wanted, that’s it. No any other wonderful words of wisdom after that, they did not even tell me any strategies on how to attack saving money. As simple as their advise was, I am still thankful for it because they gave me the introduction about money at a young age, and that time I thought of it as what they have literally said “save money to buy toys”. I loved toys so much that even up to now I purchase Star Wars merchandise and spend on online games at times. Alternately, there was a downside with that during my younger years, I saved then spent every dime of my money for games and toys, to the extent that there were no money left afterwards.

I do completely understand that our views of saving money, spending and investing are mostly predicated to the teaching of our parents. Blessed are the people who have parents that are knowledgeable with handling money and were taught about it.

In addition, every parents’ dream is to pass forward all of the best learnings and experiences they have during their lifetime, in order to ensure a better future for their children. That is why, as parents and future parents ourselves, we must be prepared to pass on the simple to advance knowledge we have and will have to our children and future children. Amongst the teachings we should impart to them is about personal finance, because it is a tool to attain their future goals and objectives in life.

Concept of money can be taught as early as a pre-schooler age of 3 to 5-years-old. This is where children will start to learn the importance of initiative to gain a sense of purpose for themselves and what they are doing. This is an essential developmental milestone, which we can incorporate the very basic idea of money. Below are the steps we could take to teach our children about it.

1.) The concept of money – Start with the basics, in here parents will teach the fundamental and physical form of money, the currency, the denomination of money, the difference of paper money and coins. Start from the lowest denomination, such as the pence, 1p, 2p, 5p, 10p, 20p, 50p, up until you reach a pound and to its highest level of paper bill (This will depend in your country’s currency).

Subsequently, it is also important to teach the value, cost and exchange of money. By this time children will have the basic mathematical operational knowledge of addition and subtraction, this is the perfect time for them to apply these knowledge in real life matters. Parents could bring their children to the grocery stores and let them be aware of the prices.

Also, once you are at the counter, you can let them look how the prices add up and let them see how much money you have for your children to have the idea of how it works. Moreover, you can play board games with them that has relation to money, like monopoly.

In addition, give them an overview how money is earned, by letting them be aware that people get money from a corresponding work that they do. This is a controversial strategy, but some people actually practice it. This is by asking children to do household chores in exchange for money, for them to learn about the relationship of work and money. This will always depend on every parents, but the important matter here is for children to be aware of the fact that money is not free and that time and energy need to be exchanged for money.

All children will eventually understand money, but with the presence and assistance of parents, they will appreciate not only the learnings but also the time, effort and love we allotted for them.

2.) Money is only a tool, not the end product – It sounds complex to explain this to our children, and it will also be hard for parents to do this if they themselves prioritize and love money itself. Nevertheless, Money is and will always be a tool. A tool to attain what we love in our life, this can be for collecting merchandises, building a company that makes a certain product which helps people, donating money to the needy, and many more. Explaining it through analogy is key, in order for children to understand it in the most simplest form, which is still an arduous task to undertake. haha! One of my favourite analogy is about creativity. As we all know, pre-school age is the start where children taps into their artistic and creative sides of their brains.

Just like drawing and colouring to show their creativity, children will need pencils and crayons to do it, but the end product is due to their excitement to see how their creativity turns out in the real world, and not about the crayons and pencils they hold.

We need as parents to let them understand that the value and happiness in life is not about the material things that we have, instead it is found in the fulfilment of what we do in our lives. With the example I gave, it is the fulfilment of children in materializing their artistic minds, and be made real into this world. This will give them a sense of purpose and enjoyment. I will drop what Simon Sinek has said, which is applicable to everyone at any age.

“Success is when reality catches up to our imagination.”

-simon sinek

3.) Basic budgeting – Saving money, as much as possible should have a purpose, this is what my parents taught me in the most basic way. I saved money for toys which was my main motivation when I was young. What is essential here is the habit of saving money for future use, which is delayed gratification in its simplest form.

Parents could always embed it into their children’s mind that whatever money their parents give to them, should always have a corresponding amount the they need to save. For instance, if we give 100 pounds they should save either 20 pounds up until they get used to it, and have a more advanced knowledge and skills of computing for percentages in order to increase their savings strategy and capacity.

Remember, what we incorporate here is the habit of saving, which they will be very thankful and grateful for, when they grow up and start their independent lives.

4.) Every penny saved will be equalled by the parents – Imagine 1 dollar saved by your children will be 1 dollar given by the parents (depending in your country’s currency). It is just like the employment matching in the 401k accounts in the US.

What we teach here is the ability and strategy to multiply money by its own, which is the power of compound interest. I have discussed the what, why and how of compound interest in my blog titled “Simple and Compound Interest”. This is what most people do not know. It is not their fault that they do not know about this, because information before was scarce unlike today. That is why, as Millennials and Gen Zs ourselves, it is our time to continue to learn and expound the awareness and learnings of financial literacy, and share it forward to others and the future generations.

Furthermore, by doing this we also give a positive reinforcement to our children, which will most likely make them save more money than to spend it into useless things. On the other hand, if your children saves a lot of money then you might find it hard to match it, the solution here is for you to talk with them and tell them that you will only match it below a certain amount. For example, you will only match your child’s savings below 50 pounds, or if they save around 50-200 pounds then you’ll just match it at 50% percent of its worth.

5.) Live what you preach – This is not for the children but for the parents. As the popular phrase states “actions speak louder than words”. If we teach children how to save, but they do not see us doing it, then it will just create conflict in their minds. Studies show that children always follow their parent’s actions more than words. That is why it is important for parents to learn and practice financially literacy themselves. It does not require for us to be very intelligent individuals, but it is essential for us to have a proper mind set and behaviour. Just like what Warren Buffett said. “

We do not have to be smarter than the rest; we have to be more disciplined than the rest.”

-warren buffett

To sum it up

Children are the future of our society, it is a cliché statement that will always hold true forever. The very basic foundations that we lay on the table for our children will be the pillars that will bring them forward. In particular, I enhanced 1,000 times more the basic knowledge that my parents taught me about finance, which I will continue to expound and will subsequently impart to my future children as well.

Some of our parents did not have the opportunity to learn this because no one taught them about it and the information was not widely distributed before, unlike today. This is the reason why it is up to us, the current generation, to learn, share and pass forward the financial knowledge and literacy to everyone else. These are all for the betterment of our children and the society as a whole.

Knowledge is my Sword and Patience is my Shield,

elmads

This blog is for informational purposes only and not a Financial Recommendation. Not all information will be accurate. Consult an independent financial professional before making any major financial decisions.