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Financial discipline: Educate children when they are young

By Graham Kajilwa | October 23rd 2021
By Graham Kajilwa | October 23rd 2021

What was the first thing you learnt about money as a child?

Was it from your parents/guardians, and looking at how you handle money today, do you think they did their best to teach you about money?

Money Maker chats with Edith Siddondo, a certified money coach and author, founder and chief executive of Profit Acumen, a money coaching firm, on important things you can teach your child about money.

Does my upbringing and the influence of my parents impact how I deal with money?

Your money story is not necessarily the financial lessons your parents directly taught you as a child. Instead, it is made up of patterns of emotions, language, thoughts, and memories that surrounded the issue of money in your home environment.

Your money story starts around the age of three to four years and is written as you watch, listen, and absorb how the adults in your life talk about and handle money.

Your money story can be scary or comforting, but it is consistent with the lessons that you learn at a young age and into adulthood. Early childhood experiences of money have a lasting influence over our financial habits as adults. Apparently, these patterns of emotions, language, thoughts and memories are unconsciously formed in the brain from an early age.

Why is it important to teach children about money?

Teaching children about money equips them with the knowledge and skills they need to manage their money effectively now and in the future.

Children who do better with money tend to have parents/guardians who talk to them about money and give them responsibility for spending and saving from an early age.

Take some time to think of your own money habits: did you pick up any of your money habits from your parents/guardian?

What good money habits can you trace back to your childhood learning? What bad money habits can you trace back to your childhood learning?

Teaching children about money will help make their future more secure. So the sooner you start developing their financial skills, the sooner they can start to hone those skills. What are some of the money skills we should teach our children?

Money planning (budgeting): - By pre-school age, many children are beginning to understand the concept of money. They tend to be curious about the world and are keen to learn. This makes it a great time to introduce them to the idea of saving, spending and the value of money.

Keeping money safe/saving: - It’s a good idea to make sure children have a safe place to keep money. Giving a child a money box or piggy bank provides them with a safe place to keep and save their money.

By the time they are seven years, most of them have already formed money habits. Talk about why it’s important to keep money safe and how you do it.

They should equally be exposed to a children’s bank account.

Should money issues be discussed openly at home?

Discussion about money is a no-go zone in many homes. It’s considered a "taboo."

Money is a touchy subject for many and the source of deep emotions, conflicts and anxieties that many people would rather not speak about.

Unfortunately, treating money as a taboo subject keeps us ignorant of better habits, practices and perspectives.

It keeps people from finding money's proper place in their lives.

In my work as a money coach, I often find that many people accumulate deep-seated pain, anxiety and shame around money, which manifest in their relationships, work and self-esteem.

The sad thing is these money pains if not dealt with from the root cause often attract more money pains by the behaviour patterns that people resort to as a mechanism to numb their money pains, for instance their spending habits, being overly generous, frugal, perfectionists or indecisive.

As a society, if we do not purpose to heal these money wounds, they become our areas of sabotage, and we are likely to unconsciously pass on these sabotaging money patterns to our children.

It’s important to transform how we relate with money from within for us to have a better outcome in the material world.

How can you entice a child to save and keep their money safe?

Introduce saving by talking about what your child could acquire with their money as it starts to grow. Ask them thought-provoking questions, for example, would they like to get that ice cream or save for something more valueable?

Also use counting to show how their money will add up if they save it.

Accounting is a challenge even for adults, as at time we cannot tell where and how our money was spent.

How can this skill be imparted in children?

Money is all about numbers. Many people shy away from internalising numbers and often find that their hard earned money simply slips through their fingers.

In my work as a money coach, I have found that counting is a very important skill in managing one’s money. Not being exposed to counting at an early age is evident in how people deal with their money.

Many people find numbers overwhelming and some do not even know basic things like how much they earn and how their net pay was arrived at.

If you are not clear on your earnings, your spending is likely to follow the same trend, and it informs why we often hear the statement: "I do not know where my money went."

And it’s true the person actually cannot account for their hard earned money. It simply slips through their fingers and out of the bank account. One only wakes up to an empty bank account and begin questioning themselves.

So counting is a valuable skill to teach children when introducing them to the subject of finances by having a selection of coins for them to count. Ask them to count out different amounts at different times. When they count correctly, reward them with one coin to put in their piggy bank, and when they’ve mastered counting coins, move up to notes and help them understand the difference between coins and notes.

How can you teach a child good spending habits?

You can start by having them help you shop. The weekly shopping is a great way to show children money management in action. Show them how you plan your shopping, such as writing a list of what you “need” versus what you “want” but can’t have it unless you have saved enough. Check the cupboards before you go, making sure you have enough money and asking if they want to buy anything with the money in their piggy bank and working out if they have enough of it.

How do you handle a situation when a child demands an item during shopping?

If they ask for things that aren’t on the list, remind them they must stick to the list because that’s what you have money for today; ask them to help find items on the list and compare prices out loud with them.

At the till, ask them to put things on the belt. If you’re paying with cash, ask them to give the cashier the money. If you’re paying by card or M-Pesa, explain where the money comes from. Also, explain about keeping money, bank cards and pin numbers safe while also making sure they see you checking if the receipt is right.

How can children be educated on impulse buying?

This age group really knows how to capitalise on impulse buying, especially when they are using someone else’s money. It is absolutely important to educate your children to avoid impulse buying because it can lead to several dangerous financial disasters. If your kids acquire the habit of impulsive spending, it’s a hard lifestyle to walk away from.

Impulse buying is so much connected to their emotions, which drives them crazy when they spot something they desire. As adults, we find it difficult to restrict ourselves from this habit. In the case of children, they are not mature enough to figure out and deal with their emotions, hence they end up asking for everything they see.

Encourage your children to budget with their allowance or earnings received and ensure that they stick to it. This should be a monthly activity. They should create a budget for their short-term goals like candies, stickers or glitter pens and long-term goals like a bicycle, musical instrument or games.

How can a parent teach their child the value of money and also help them not to feel entitled?

Work is one of the best ways to combat the attitude of entitlement.

It’s not just the mere fact of working and doing. Children need to be taught to do things well and with love. They need to understand that everything gains the value of the love with which it is done. Once your children understand that money comes from work done well and with love, they won’t be able to spend money on a toy without considering how much work went into actually making that money.

Sure, they can and should enjoy a good purchase, but working for it makes every purchase—even a toy or candy—feel like an accomplishment, not an entitlement.

How can you weed out the hand-out culture in children?

One of the best ways to teach your children about handling money is to give them a chance to make some of their own!

Encourage them to discover the dignity of working and earning money themselves. The worst thing you can do is become a human ATM and give your children money as and when they ask for it.

Select a handful of responsibilities your child is capable of doing and put a monetary reward on each task. As soon as your child finishes the job, you should inspect the work, express your excitement at the job well done and pay them. Pay them as soon as the job is complete. They need that immediate connection between the work they did and the money you’re handing them. Younger children don’t relate the action and the reward if payment is delayed, especially by several days.

What if the chores or responsibilities come with no reward?

You must equally balance this out by teaching them to develop a spirit of service even when there is no reward. Not all work must be paid for. Assign them some duties with no reward but demand of them to do these tasks and finish them well.

Teaching your children about money at any stage is going to take time on your part. It won’t always be easy. But if you want your children to know how to successfully manage their money when they get older, taking the time now is worthwhile.

The small steps you take today can have a major, measurable impact on your children and on their future success. 

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