Financial planning for children
The importance of teaching children how to budget and save money Discuss this article
They learn their one-two-threes before their A, B, Cs. They can figure out how many bricks are needed to build a tower, how many cookies they can fit in each hand and how many minutes’ screen time they are allowed before dinner. With such strong numeracy skills in their tender years, it’s the perfect time to teach our kids about cash. And so this month we sat down to count our dirhams and fils with Jason O’Connell, Financial Planner and Senior Partner of Imperius team at Holborn Assets Management, who also happens to be a dad of two. Here, he shares some top tips in money management skills for our little monsters.
Line little pockets
Every child is different but four years old is usually a good age to introduce the concept of pocket money. It’s a great way to help kids understand the relationship between money and work. Linking pocket money to chores around the house (no matter how small, though you might want to avoid rewarding them for cleaning their rooms) introduces them to the realities of how money is acquired. Saving boxes are a good starting point to encourage little ones to start building up a pot of money to purchase something they really want. A clear bottle to hold their savings allows children to see and measure progress. Encourage them to save a portion of their pocket money, or money received from grandparents and so on, as this opens up their eyes to budgeting.
Nurture little savers
Delayed gratification is key to our children’s understanding about saving for something that really appeals to them. When their little eyes are drawn to a shiny new doll or a cool new game, encourage them to become a detective and do some research. They can compare different options. For example, if they really want a bike, have them look at second-hand options on some of the many resale websites in comparison to buying a brand-new bike in a sports shop. Help them to understand how much of their savings or pocket money it would take for each option. Similarly, for a trip to a water park, if you have Time Out vouchers, suggest that they go with a friend and split the cost so they have more fun, but more importantly save 50 percent.
Create lots of interest
Agree a savings target for a month with your child. Show them a five dirham note and explain that if they save the agreed amount they will be allowed to keep this as a thank you for sticking to the plan. However, if they don’t meet the target they don’t earn it. Using an old-fashioned lodgment/deposit book can help them to monitor the progress made, the impact of the “incentive-interest” and motivate them to become a disciplined little saver.
Take a little risk
Have a bit of fun with your child while teaching them about the investment market. Have them choose what portion of their pocket money they want to “invest” in the game. Flip a one dirham coin and have them call out whether it lands on the Della side or not. If they choose the correct one they win the amount, if they don’t they lose that portion. A recent study by the University of Kansas found that children who are aware of savings accounts in their early years are more likely to accumulate assets later on. It’s never too young to become a money mogul!
Jason O’Connell, Senior Partner of Imperius team at Holborn Asset Management, email@example.com, www.imperius.ae (052 872 4141).
Three more apps to help count fils
Little spenders can set saving goals, timeframes and regular contributions. A solid start to your kids becoming money-conscious. P2K money, free, Apple iStore.
I Want More
A 3D game which educates kids on the difference between needs and wants. Kids must avoid losing money to three sneaky “I wannas”. Save! The Game, free, Apple iStore.
By Time Out Abu Dhabi Kids staff
A cute virtual bank that helps kids keep track of their cash. The fact that it was created by an 11-year-old is sure to appeal, too! www.bankaroo.com.
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