DUBAI 30 August 2018: Education is ultimately the most powerful tool when it comes to money, say advisers at personal finance firm Guardian Wealth Management.
In fact, according to a report by Cambridge University, children start to formulate habits as young as age seven. Therefore, the more parents can teach their children early on, the more they can learn from it and use it to create good habits later in life.
Things like how credit works, the importance of savings and how to prioritise paying back debts is information that will go a long way in the future.
Be Transparent
“It is important to be transparent with children about money from an early age, so they understand its value as they go through life. As a report from Moody Analytic’s shows, younger generations are facing a savings deficit, so the more parents can teach them early on the better,” says Hamzah Shalchi, Regional Director of Guardian Wealth Management.
Additionally, advisers at the global wealth management company also advise that leading by example is just as important as telling children what to do.
“They will look to copy your money practices until they are old enough to make informed choices, so show them how to be responsible. For instance, my parents always paid cash for big ticket items such as cars rather than getting them on credit. This has meant that now that I am an adult I always assess whether I can actually afford something before I purchase it, rather than racking up unnecessary debt”, says Shalchi.
Pocket Money
Instilling a good work ethic into children is also a good idea and pocket money is a good tool for teaching money management, but this should come from earning it. Set children one task each week that they must complete and reward them not only when it is done but if it is done well; they will soon associate hard work with rewards.
“Save first, spend later! It’s a concept that I am continually trying to teach adults so if you can communicate this early to your kids using their pocket money as an example, it will go such a long way later in life. Encourage children to forego the sweets or chocolates they may spend their pocket money on each week and save it to buy bigger treats such as toys later down the line”.
What You Can Afford
Living within one’s means is another life lesson to teach children. In this region especially, it is easy for people to splurge on a luxury lifestyle but little percentage can actually afford it. Little ones need to realise that they might have to sacrifice some things to stay in the red and avoid getting into the black.
Finally, the biggest advice for parents is to start saving for their children’s future now. The sooner they can save for them, the more their money they will have when they need it due to the power of compound interest.
Save
“Even if it is just a couple of hundred dirhams each month, over time it will earn interest which in turn will earn interest and accumulate into a nice little savings pot for your children. There are many savings options available so shop around for the best options for you and even better, seek professional advice”.