Many people associate adulthood with being financially responsible. But, how to be financially responsible is not something traditionally taught in school or university — crazy, right? No shade for all the algebra we learn that many of us don't use, but being able to fund yourself responsibility throughout life is a real-life skill that practically every single individual needs.
If you're a parent, we bet you want to nurture your kids to become responsible adults, which means ensuring their financial literacy goes into the mix along with teaching them how to make relationships, communicate emotions, take responsibility for deadlines etc.
When should you start encouraging your kids to be financially responsible?
In the Middle East, it's common culture that your mom and dad will financially support you all the way through to you moving into your own household, in one way or another. There's the standard all-inclusive support all the way up to the age of 18, as with most cultures around the world, but it's common for Arab parents to support their kids financially through university and even by extending a place to live when they're back.
But this generosity doesn't mean that you shouldn't at least teach your kids about saving to buy a house, budgeting house expenses etc. There are no right or wrong answers when it comes to when you should start making them aware of money as a life currency, but understand that habits form early — so, the earlier, then the more ingrained they'll be (which is better because it will come more as second nature and will therefore be easier!).
Here's how you to instill lifelong personal finance management skills amongst your kids
(1) Allow your kids room to "earn" their allowance.
Instead of just buying them or granting them the things they desire, allow your kids to work for it. We suggest giving them a measurable goal to work towards and predefining the reward — this makes the system attainable in their minds instead of vague.
An example of this would be: you'll earn a 1-month subscription to [insert favorite game or content streaming platform] if you wash the dishes every day after dinner for 1 month.
(2) Teach your kids to set priorities against a budget.
Instead of buying or granting your kids what they want directly, you can incentivize them to earn an allowance that they can then use as a budget to decide what to spend on themselves. This will teach them to prioritize what's "worth" spending on, and if you teach them that they can roll over the earnings forward, they can save up to buy something more expensive in the future.
An example of this would be: you'll earn AED 500 if you wash the dishes every day after dinner for 1 month.
(3) Teach kids about setting a balance and tracking their spending
Once you give your kids room to earn money and possibly even decide for themselves what to do with it, it's important to teach them mindfulness around how they spend it. You can help them create a forward-looking budget where they can project their earnings and then make a budget to figure out how much they're going to spend, what they're going to spend on, and how much they're going to roll over to savings in the foreseeable future.
An example of this would be: you'll earn AED 500 indefinitely if you wash the dishes every day after dinner for 1 month.
As the more financially-experienced parent, it would be helpful to our kids to help them draw out a financial plan and teach them how digital tools like FinTech apps can help them do this seamlessly. After all, kids don't walk around with notebooks anymore, do they?
(4) Teach kids about digital tools to help them track their spending
On that note, you can also introduce your kids to digital payment tools (such as virtual cards) to help them track their spending easily. If the process of tracking is too manual you risk their losing interest. After all, you must find it cumbersome to track your own calories in the MyFitnessPal app, with every bite of food you take, just to get into that gown you're planning on wearing to your little sister's wedding, right?
If you want to make sure that you don't overspend, you can set controls on these digital tools. Using prepaid virtual cards is ideal because you can preload the card and top them up easily, thereby adjusting your kids' spending limits and overseeing their journey into learning about personal finance management.
Bankiom can help parents easily track their kids spending whilst enabling them with the opportunity to learn about financial management through our simple and easy-to-create virtual cards powered by Mastercard.