I am not sure that I learned about money when I was young. Actually, I am almost sure that I did not.
To be fair to my parents, I think there was no consciousness yet, at that time, on the importance of teaching kids about money. What they knew was that they had to provide and that was the end of it.
But the power to dream of riches and making it come true lies at the core of one’s life – in one’s childhood. His views about poverty, about money, his poverty mindset (money does not grow on trees) and his wealth mindset (money grows on trees) start at that time which is at the root of all his memories.
And so we as parents have a duty to make those memories good ones, and that the mindset we cultivate is one of wealth.
Are you willing to take the step?
Some words from those who have taken the step…
Step One: The Allowance
Yes, you painstakingly prepare his brown bag – baon – going out of your wits while grocery shopping – making sure to get a good mix of the healthy and the junk (which he likes), cook it, pack it, kiss him goodbye as he goes off to school… but wait – you have got to fork that money over. It does not have to be a lot, but just enough to teach him beautiful and practical money stuff like:
- Spending. Children should be allowed and encouraged to make spending decisions because they will learn from their spending choices (whether good or bad, whether you like it or not). And because the child has spent, the parents can then initiate a discussion about it – its pros and cons, the use of common sense (it is not so common after all), researching before making major purchases (should it be the Nintendo DS or the Wii?), waiting for the right time to buy. That yes, it is okay to spend and enjoy life, and that no, it is not okay to be a miser.
- Saving. Give your child’s allowance in denominations that would encourage saving. Say it is $5 a day. Give it to him in $1 bills and suggest (imply, hint) that at least $1 be set aside for savings
- Giving. This is the great multiplier, one of the greatest secrets in The Secret. Start him young on this wonderful opiate.
Step Two: Investing
Take his little hands, walk to the bank and introduce him to the magic of compounded interest (preferably in spirited and animated tones, with voices!). “Imagine anak, your savings of $5 a week at 6 percent interest compounded quarterly will total about $266 after a year, $1,503 after 5 years, and $3,527 after 10 years.” Then smile here (though he will look as if you had gone crazy).
But before you get really carried away (he is young) – stop. If he asks if he can withdraw from his account, say yes (and hide the grimace). The point of the exercise is to make saving and investing enjoyable. It will lose all appeal if he gets the idea that his money is somewhere that he could not get to.
Step Three: Goal Setting
Regale your child with images of things that his money could buy – new clothes, maybe, or a new toy, a new pet. See with his eyes and contemplate with him as he looks at his goals in a different way now that he has in his hands the power to make it come true.
Step Four: Some More Tips
The notebook. Encourage your child to list down his “money-coming-in” and “money-going-out” (income, expense). Having him watch and track his spending would make him aware of the flow of money and develop a preference (hopefully, it will be for money-coming-in).
The talk. Most children do not know the state of their family’s finances. As a matter of fact, talking to your children about money is a fairly cutting-edge concept (read: old but still unaccepted). I remember that as I child, I did not know when we were poor or when we were rich and that I would just get little clues: a curt remark, dead silence, the look, which would just hurt and confuse me. An atmosphere of openness about financial matters would help the child be aware of financial matters – of when daddy and mommy needs understanding, of why and when celebrations could be celebrated, and that sometimes there are just rainy days.
Good luck. And in the midst of this exercise (moral obligation, responsibility, duty) may both of you have fun.