What do your children know about money?

How much do your children know about money?

While the older ones may have an idea about how it is earned and what financial literacy is all about, younger children often think money can be obtained effortlessly, especially when their parents withdraw cash from ATMs or mobile money transfer services.

“Withdrawing money through the ATM makes children believe that anybody can go there for money any time,” Mr James Maina, a parent, says.

Before his children came to understand how money got into the ATM, they used to think that their parents had all the money they needed for whatever expenditure and it was just a matter of asking for it.

“With time, however, they have come to understand that getting money is a struggle. This financial literacy has prompted them to question the rationale of spending too much on unnecessary purchases,” he says.

Financial literacy is defined as the skills and knowledge that allow an individual to make informed and effective decisions through their understanding of finances.

How, then, can you explain to the children the number of times you have skipped lunch to afford that packet of milk or school fees and, in the process, equip them with financial literacy?

Mr Polycarp Ngoje, a financial expert, says most parents wrongly assume that children understand how money is earned. He advises that they should tell them how much they earn and explain the expenditure involved.

“This way, children will appreciate efforts made towards earning money to pay their school fees and afford other basic needs,” says Mr Ngoje, the executive director at Academy of Savvy Investors Ltd.

Ms Purity Nyamu of Nurture Smart stresses the need to teach children the principles of saving from an early age.

“Educate them on the principle of waiting or delaying gratification, which goes along with acquiring of a certain item. The anticipation of getting the new item makes them learn why they should save money for it,” she says.

The value of money can be appreciated if they learn that the bus conductor will not accept less of the bus fare when they are moving from point A to point B.

Saving culture
“With this in mind, they will inculcate a saving culture early in life and avoid some of the challenges many adults face by borrowing to buy what they need.”

And what about the influence of neighbours? “Live within your means, not to please others as this will be expensive,” she says of what children should learn.

If you have a business, it is easier to leverage by allowing the children to take part in learning how money is obtained. At Nurture Smart, for example, children are taught how money works and how to use it wisely.

For Mr Peter Maathai, engaging children in his Neema Boutique located in Ongata Rongai, means offering them hands-on experience on what is involved in earning money.

This also acts as a platform to correct them on the dos and don’ts in managing money.

However, some parents view their children with suspicion, fearing that they may misuse resources.

“Each child is different. Some will treat the business as their treasure for future prosperity, while others will blow it away on luxuries,” he says.

Mr Maathai adds that one of his daughters asked him how he managed to pay their school fees and other expenses from the business.

Allowing children to take part in business is equipping them with knowledge that money is earned through the exchange of goods and the skills at play, Mr James Shikwati says.

Mr Shikwati, the founder of Inter Region Economic Network and also the country director of Students in Free Enterprise, says: “This way, they will appreciate the value of money and take care of it. Not many business people allow their children to take part in day-to-day activities of the enterprise.

“However, the Asian community is more pro-active in exposing their children to business ethos at an early age, compared to other Kenyan communities who invest more in passing on professionalism to their children like law or politics,” he says.

Mr Shikwati explains that parents can devise chores to help their children understand the value of money.

“Such chores can reward efficient use of time and see them grow up with the full knowledge that money comes from the value exchanged at their places of work and business.”

Most importantly, by engaging them in chores that enable them to also earn money, they will learn the pain and the investment in time involved in earning money and in the process, learn basic financial literacy skills.

“Engaging them actively will make them responsible adults able to live within their means and inculcate in them an entrepreneurial culture,” Mr Ngoje adds.

The need to educate children in saving, donating, investing, and spending accompanied by incentives should be considered.

“With time, they will be able to learn the multiplier effect of money,” Mr Ngoje says.