Why you should teach children about money

The months of December and January are usually dedicated to children’s financial literacy by our firm, Akamai Global. Over the eight years, we have repeatedly observed the need for and impact of giving money and business education to children.

Our classes start from Primary 7 leavers and go up to Senior 6 leavers. Often, the people that gain the most from our classes are the P7 leavers. They are more open to learn and are not full of bad ideas and habits unlike the older lot. There are at least three reasons why we need to teach basic money and business skills and knowledge to children.

Being clueless about money and business
Many adults are clueless when it comes to money and business. Fraudsters really take advantage of these kind of people especially through schemes where very high profits or return on investment is promised for seemingly little effort but eventually the investor loses all their money. When a certain bank continually offered very high deposit interest rates, people who were financially literate shied away from it but the ignorant swarmed on it like flies do to refuse. The attitude and behaviour of adults to debt where people borrow to pay for household consumption or borrow more than they can repay is another indicator that being old in age does not mean a person is also mature with regard to handling money.

Adults who have poor or no money and business knowledge become role models and mentors of young people and they pass on their knowledge, attitude and behaviour to children and maintain the vicious cycle of financial illiteracy.
Start good money and business habits early.

There is a biblical saying that applies universally: Train up a child in the way he should go, and when he is old he will not depart from it (Proverbs 22:6). Young people should be given the opportunity to learn about and adopt positive money and business habits early in life: habits such as keeping track of income, expenses, debt or assets; saving money; being accountable for pocket money. In a country with very high unemployment, it is very useful for young people to learn business and investment skills because that might be the only way they can earn a living later in life.

Some bad money habits start early
In our interaction with young people, we have observed that some bad money habits start early but can be more easily stopped when addressed early as well. One vice which is common in boarding schools is borrowing. School children borrow at interest rate of 100 per cent until the next visitation day. This means when a child borrows Shs20,000 whether two weeks or two days to visiting day, on the next visiting day they pay back Shs40,000. Many children then resort to telling lies in order to extort more money from their parent to take care of both the debt and their ongoing expenses. One can imagine other negative knock-on effects of borrowing on the ability of the child to study.

Talk cash
Use a budget. Many parents use an allowance as a way to teach children about money. You can take it one step further by helping them create a budget for their cash.
Help set long-term savings goals. Most children want something new — shoes, video games or gadgets. Why not have them save enough to make the purchase themselves? Once you show your children the cost of what they want, introduce the idea of creating a long-term savings plan.
Explain borrowing. Children might not even realise that your family has financial obligations to consider, such as a mortgage for your home. To explain a loan, provide your children with an example they can relate to, such as borrowing money for lunch.

James Abola is the team leader of Akamai Global, a business and finance consulting firm. Email: [email protected].