Help your kid become money-smart

If I may borrow from my childhood about two decades ago, I grew up knowing very little about money.

The only times I handled money were when I was sent to buy something or given the occasional allowance for an outing. But my first real experience with money came was when I joined Form One.

During my first term in boarding school, I did not now what to do with my pocket money, which I kept carefully hidden in a corner of my suitcase. After about a week, I saw the other students spending their pocket money at the school canteen so I decided to do the same.

I was 13 at the time and had no idea how to budget, so I had this nagging fear that my money might run out before my parents came to visit me. To cut a long story short, when school closed, I went back home with some of my pocket money. The whole family had a good laugh at my expense.

Come second term, I was a lot wiser, so by the time school closed, I had used all my pocket money. Once again my family laughed at me, asking what had happened.

I had spent all my money after heeding advice from my older sister, then in Form Three, that pocket money was meant for buying chips, bread, soda and queen cakes!

Like me, many people will tell you that the first time they began handling their own money was when they went to boarding school. Handling money is not something you learn in school, but from observing your parents and peers.

Many parents are reluctant to introduce their children to money and try to hide it from them instead. This fear is based on the belief that a “money-wise” child might use this knowledge to access items or places they deem inappropriate.

But thanks to the current pace of development, with facilities such as the Internet making communication easier, some parents have realised that it is better to educate their children on money matters from a young age.

A money-smart child — one who knows how to plan for their money — has a life skill that will definitely serve him well in the future.

So it’s much better for children to learn about money from their parents before they are influenced by the readily available but sometimes distorted images of what money is all about from their peers or the media.

In fact, following this realisation, some parents have gone a step further and are taking their children for formal training on handling money.

At Nurture Smart, an institution that trains children on money matters, they are taught concepts such as spending, saving, investing, earning and giving away money, says Purity Nyamu, the programmes director.

Surprisingly, says Nyamu, a child begins understanding the importance of money at about the age of two years. At that age, the child is able to read his or her parents’ reactions towards money.

Unknown to many parents, the child can tell their attitude towards money from what he/she hears them saying, their shopping habits and from the general mood when they have money or are broke.

“This informal introduction of money to children takes place at home,” Nyamu explains. And that being the case, she adds, parents should try to be positive about money. “Present it as good to children and always look at the positive side of what money can do for you,” she advises.

A parent’s shopping habits contribute a lot to the what their child learns about handling money. A parent who goes shopping with a child and uses a list informally trains the child on budgeting.

“This is unlike the one who walks into a shop and randomly picks the items she needs. That is the best way to introduce a child to impulse buying,” she warns.

The starting point for introducing money to children at home is to let them know that it is not evil. So, when your child is six, you can start giving him or her a small allowance.

Parents may give all their children some spending money, ensuring that the amount given to each child is appropriate for his or her age. They can then should sit down with each child and discuss how the money will be spent.

“Let the child draw up a spending plan and divide the money according to his or her priorities. After you agree on this with him or her, let them spend the money. After a specified period, review the implementation,” Nyamu suggests.

She explains that this monitoring helps keeps you informed about what your child buys with the allowance, and also helps you learn about his or her spending habits. Make a habit of doing this say, monthly, since introducing a child to concepts involving money is progressive.

At Nurture Smart, which targets children between the ages of six and 15, the children draw up a spending plan for their money. The training involves the use of practical computer games and group-based activities. Children of the same age are put in groups of five or six.

The facilitators use four internationally recognised games to equip the children with skills on the basics of handling money.

There is also a curriculum that teaches the children certain business skills, depending on their age, and they are taught reading and mathematical skills that enable them to understand financial terms.

“They are taught the meaning of terms such as “savings” and “investments” or phrases such as “rent is due” and before you know it, they begin to practice using these words,” Nyamu explains.

The games also help the children think globally because they learn that they can invest, manufacture and hire from any part of the world.

The training comprises different modules, which are divided into weekend and weekday programmes. Each module is designed to take six hours, and may be spread over a couple of weeks, depending on the time schedule.

“But the weekend training programme runs for a whole day and parents are also invited so that they can be given tips on how to continue training their children at home. The longest training session is a three-day-camp, usually over the school holidays, at the training centre in Nairobi.

However, this formal training should be supported at home. Parents are encouraged to keep any conversation at home about money very positive and act like they control money so that the child does not think that money controls them.

“Parents should not behave in a way that makes it possible for the child to tell when they have money and when they are broke,” Nyamu advises.

If they always seem in control, she notes, a child will respect money and learn how to interact with it — when to spend and when to save.

For instance, if a child asks for a bicycle, try not to get him or her one right away. Nyamu says that a better approach would be for the child and parent to identify the bicycle and how much it costs.

Thereafter, the two should discuss and agree on what proportion of the child’s allowance he or she will save towards the cost of the bike, and for how long, with the parent’s role being to top up the sum.

“This is fair and works well for both parties,” observes Nyamu.

Nurture Smart has been training children since 2006, and some of the children put the knowledge they gain to good use.

Nyamu recalls an incident in which one of the children challenged her parents to open for her a proper bank account instead of the piggy bank she was operating.

“Her mother took her to the bank and when they sat down with the bank officer, the young girl confidently announced that she would speak for herself.

The mother watched in awe as her 11-year-old daughter negotiated the interest rate for a savings account and argued her case with the officer,” she narrates.

She also recalls the case of a 13 year-old boy who started making and selling cards at school.

“He makes them during his free time on weekends and saves part of what he earns. This boy will be way ahead of his peers 10 years from now,” she remarks.

Many parents spend a lot of time trying to orient their children on other life-skills like communication, hygiene and etiquette, but with the rate at which life is changing, they would be well advised to consider doing the same with money.