Guiding Your Children to Financial Freedom
By Ayo Olesin
Older children can help when the bills are to be paid and can be sent to the bank or PHCN office. Here, they can learn about day-to-day financial responsibility.
Since most children will enter adult life as workers, it would be useful the get them used to the routine of a regular income and managing it right.
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
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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