Oran Hall | Financial literacy in the home
The financial landscape is getting increasingly complex, so financial literacy is becoming more important as a core skill for participating in society.
It is evident that many young people, including the well-educated, are not equipped to manage their financial affairs well. Training children at an early age to make effective financial decisions could be a meaningful way to effect change.
It cannot be too early for children to learn to choose between different financial options and to learn to manage money over which they have discretion. Although some schools and financial institutions may have programmes that encourage children to save, notwithstanding the limited ability of some parents to teach their children about the more complex aspects of financial management, there is still a place for the home in equipping children to manage their financial resources now thereby preparing them to do so when they get older.
I have often marvelled at the ability of individuals who earn low incomes to literally stretch their income to provide for their families because of the good sense they exercise in setting priorities and sticking to them and their uncanny ability to save even if they do not use the more sophisticated means generally applied by others better endowed with financial resources.
So although I strongly believe that financial education should be incorporated into the curriculum of our schools, there is a place for the family in training children to manage money well. This is a long-term process, but it can lead to long-term benefits, not just for the children, but for the children they wil,l in turn, be parents to when they become adults.
Parents can begin by discussing financial issues openly at home. Let the children understand how money is earned – the close link that exists between working and earning money or operating even a very small business and making money. Help them understand why there is a limit on how much can be spent from what is earned and why it is more important to spend on some items than on others.
Parents can allow their children to accompany them to the shop and observe how they go about the shopping exercise. Many parents go beyond that by sending their children to make purchases at the shop. This has been happening for a long time and can be used by all parents, no matter how humble, to teach some of the basic principles of spending and money management, generally.
Parents can develop a sense of working together on financial matters. No quarrels over money. This is a tough one for adults who come from different backgrounds with different attitudes to money and who find it hard to chart a common approach when they set up a family with someone who is not like them.
Let the children learn to manage their own money, perhaps coming into their possession in the form of an allowance or from their own efforts or from tasks given them. I do recognise that it is not universally accepted that parents are at liberty to give some monetary reward to their children for assigned activities outside of regular chores around the home.
Parents should be models. They should be good examples, so it is incumbent on them to practise what they preach: pay debts, spend wisely, give an honest day’s work for a day’s pay, keep the promises they make, save, live within their means, determine priorities and live by them, be blind to what the Joneses have – just to name a few. Which of these needs a fat bank account or above-average education?
Most parents recognise that no two children are alike, so it is likely that some will respond in unfavourable ways to the lessons their parents teach. Further, there are other influences: friends and school mates, other family members, the media, for example. I believe that with a strong foundation established at home, children are better equipped to resist these pressures.
Parents should resist the demands of undisciplined children to have their own way, often for short-term gain. This may require patience and much moral suasion, but it is necessary lest such children become so set in their ways, they carry their out-of-control ways into adulthood and ruin themselves financially and otherwise.
Parents and adults responsible for raising children can help the children to develop goals: short-term, medium-term, and long-term. Start with the short-term, such as saving to buy a game or a book, then move to longer-term goals such as acquiring a bicycle.
Parents must be prepared to live by the standards they set for their children and should be fair, consistent, and ready to lovingly try to correct unwholesome traits in their children before they get out of hand.
Oran A. Hall, principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.