First, apologies for the silence. I have no reason for not posting (I have so many drafts in my notes), just plain old laziness. Today I got a shiny fast computer, hopefully it will keep me motivated to write. I have two e-book projects I am working on (watch this space, one will be free!) and I am learning how to write from Zen Habits by starting small: writing for just 10 minutes every day. Wish me luck!
Since I became a parent 7 or so months ago, I have read quite a bit about the best way to teach your children about money, and financial responsibility. Isn’t it too early to think about these things? Well, I’m a slow thinker you could say. I like to fully process something before implementing it, especially when it is affecting a sensitive little life.
There are many theories out there on what is right: Some people advocate for an allowance, others say kids should work for an allowance. Some people say that children should learn by watching their parents plan for their money, others say that kids should never know what their parents earn because it breeds entitlement if it’s too much, or insecurity if it is too little. Basically, the information out there is as confusing as it is enlightening. I have settled on a few ideas that I hope to implement with my daughter, borrowed from reading, but also my own upbringing. I think my mother did a terrific job raising an entrepreneur, and I applaud her for that.
Allowance Vs No Allowance
I didn’t have an allowance growing up, save for when I went to boarding school at 10 years old, then I got a little pocket money. Before that, I had “money needs”, which I met by either spending gift money I received from relatives and school (yes, back then uncles and aunties gave you money for being position 1 in school), or looking for ways to earn money off my parents of even total strangers. I remember selling guavas by the road side and my first business venture which was cleaning and disinfecting glass bottles and selling them to the local dispensary which had a bottles shortage. I was about 5 years old when I ran the bottles business, with a lot of support from my father who would walk me to the dispensary to sell my goods. I’d also do odd chores around the house for pay.
I intend to take the same approach with my children. I loved that in our home there was clear distinction on which chores could earn you money, and which counted as your duties to support the home. For example, if you helped weed the coffee farm, you would get paid because it saved the parents money they would have otherwise spent, and the kids’ rate was always higher than the going rate to keep us motivated. It will be the same case at my home. There are common chores which everyone WILL HAVE to do, then chores like washing the car which will income opportunities. The aim isn’t to make the children work horses (I most probably will be overpaying them), but to help them understand the relationship between work and an income.
Forced Saving (piggy bank) Vs Free Spending
Here there are two approaches: One, you teach your children to save 10% (or more) of whatever money they get, and you enforce this by getting them a piggy bank and requiring them to deposit their savings. The second approach is more “child led”, where you teach the basics, then let the child choose whether to save or not.
I will go with the second option. I will teach my children the importance of saving, and demonstrate it by showing them things they could own by saving long enough. I will also buy a piggy bank for them, and open an account, but I will leave the practical lesson for them to learn by themselves. That way saving isn’t “mommy’s project”, but something they see the need to do. There are interesting ways to make saving attractive to kids. For example, there are things they will want to own but you cannot afford to buy for them (see next heading), encourage them to save by telling them you will match them shilling by shilling if they save for it. My grandfather taught this excellently, by contributing 50% to my first phone. He had planned to give me Kshs 6,000 for a phone, but since I’d only saved Kshs 3,000, he gave me half of it and I ended up with a cheaper phone. Such lessons stick more than the forced piggy-bank saving.
How much “adult finances” should children know?
I am of the opinion that children learn best by example, but exposure to my finances will dependent on age and maturity. For example, if my LO has a basic understanding of money at 5 years old, I can enlist her help in drawing up the groceries budget, and making decisions on what we can and cannot buy in the house. That way she learns about budgeting by example. Maybe by 10, I can expose her to the entire family budget and how investments work, then by 13 she could know how much I earn, and how I spend it. Too early? Nope. I got my first budgeting hard lesson at 10 years old when going to boarding school. We had a shop, so I was quite liberal in drawing up a shopping list, hoping that Mom would let me pick anything I wanted since I was going to “jail” anyways. Shock on me, she looked at the list, didn’t cancel anything, but handed me a Kshs 1,000 bob note. She said that’s all she had, I was to tailor my shopping around that. She did that all through, and by high school, I was such an expert at budgeting, I would end up with spare change for “grub” (biscuits, juice etc).
Children aren’t as delicate as we think. I knew my parents didn’t earn much even before I hit teenage, and this helped me understand a lot, especially because I was in a high cost high school, where almost every other child could afford stuff my parents couldn’t. I remember we had 4 visiting days per term, but my mom could only afford to travel to Nairobi for one, and because I understood where I came from (and money didn’t define me), that was NEVER an issue.
Ultimately, the parent has a lot of power in shaping a child’s character, but like anything worth having, it is an investment of time and effort.
What are your thoughts about children and personal finance? Next post, I explore this further, looking at creative ways to teach various aspects of personal finance to your children.
Thanks for reading.