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Practical lessons can be taught by placing children on an allowance, say
monthly. If they go broke by the middle of the month, once or twice and no
”relief” is forthcoming from either parent, they will better appreciate the need
for budgeting.
Teenagers can be encouraged to work part time and groomed to earn, save and
accumulate money.
With the principles of saving and budgeting imbibed, the next big step is to
teach them to invest. Parents can help by investing on behalf of their children
from their early days, but as they enter their teens, they should be gradually
introduced to the world of investment and its various vehicles –– stocks, mutual
funds, treasury bills, property etc.
But most importantly, they must be taught to invest in their greatest asset,
which is time.
Young people are in the best position to take advantage of the power of
compounding growth. For example, a N1,000 per year investment in a mutual fund
by an 18-year old that records a modest eight per cent return per annum will be
worth N328,000 by the time he is 60.
Beyond motivation to save and invest, children need to be taught financial
values to give them a more rounded view of money, as a means to an end not as an
end in itself.
Carrie Schwab Pomerantz, a banker at Charles Schwab & Co, and mother of three,
notes that ”In an affluent society that seems more determined than ever to get
more - more wealth, more possessions, and more of the status that seems to come
with those commodities - values and virtues are more important than ever.
Teaching your kids the ABCs of money management is crucial, but sharing your
good money values can help make your hard work stick.”
She believes that children should be allowed to explore to the financial
realties of citizenship - the importance of giving something back to society, in
form of taxes or donations to charity.
”Watching television can be a source of knowledge and values: Kids are extremely
susceptible to the desires and manipulations of advertising, and you can help
them see through the hype and teach them that their happiness isn‘t dependent on
the next big thing”, she points out.
Parents can take the opportunities of certain financial challenges to highlight
specific lessons, such as the principle of opportunity cost.
For example, a parent‘s decision to buy a used car instead of a new one and
invest in a piece of land to build the family home could teach the children
about the pleasures of delayed gratification.
This does not suggest that parents should deprive themselves of necessities, but
planning and saving towards a specific goal does bring a sense of accomplishment
that will pervade the entire family, and the lesson is never lost.
Children should be moulded to plan for big purchases, to put their own
resourcefulness, as savers and earners, to work.
They should be empowered to show some initiative, make some effort and be
willing to make short-term sacrifices for long-term goals, which is the essence
of adult life and responsibility.
Such values, were the standard a generation ago. But growing up in a society
where sudden wealth is no longer questioned makes it imperative for parents to
redouble their efforts to setting their children on the path to financial
responsibility.
- Culled From Punch
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