Lead by example

Children are naturally observant and pick up on your cues. More than anything you say, it’s your day-to-day financial behaviour that shows them how to manage money. If you want your kids to save, budget and spend responsibly, you must exhibit these behaviours yourself.

Have open conversations about money

Parents often avoid conversations around money because they don’t want to burden their children with these discussions, assuming that they will learn when they’re older. As a result, many children grow into adults who have no idea about how to manage money.

The best strategy is to demystify money and finance through open discussions with your children. It’s healthy and educational to have regular conversations around money management beyond just basic saving and spending.

Things you should talk about:

• Where money comes from - your job and investments
• The household budget and making financial tradeoffs to balance spending and saving
• How you choose what to buy based on needs vs. wants
• The value of comparison shopping and how to find good deals
• Your financial challenges and how you manage problems like debt and overspending
• Short, medium and long-term savings strategies
• Age-appropriate finance concepts

Use real-life examples as examples when making everyday spending decisions together. Importantly, make money talks a safe space for curious questions, without judgment.

Empower your children to manage their own finances

Experiential learning sticks better than abstract advice. Give your children hands-on practice.

• Allowance
  An age-appropriate weekly or monthly allowance helps children learn financial responsibility. Let them make minor spending decisions, like saving for a toy or spending all their money on candy. Make them live with the consequences of overspending so they are wiser the next time.
• Set parameters
  Set rules around what they can and can’t buy. As they get older, relax restrictions while monitoring bigger purchases. You can even check for apps that allow you to provide digital allowances and oversee transactions.
• Encourage saving
  Suggest putting a portion of money they receive as gifts into short and long-term savings. Show them how small savings add up over time. Tools like savings accounts and auto-transfers make saving a habit.
• Give financial independence
  When teenagers earn their own money, leave them fully in charge of their funds. Offer advice only when asked and respect their financial autonomy.
• Allow mistakes
  Let small financial mistakes happen. Experiencing minor negative consequences teaches lessons and responsibility. Refrain from rescue parenting. While modeling good financial behaviour is important, your kids need hands-on experience to internalise money management skills. Allow financial independence matched to their maturity level.

Avoid common parenting pitfalls

Some well-intended parenting approaches to teaching financial literacy may backfire. Be mindful of some ways this can happen:

• Shielding from financial reality
  As mentioned earlier, overshielding your child from family financial struggles prevents them from learning important lessons about solving money problems. Financial concerns are a reality of life and if you prepare your children by involving and educating them appropriately based on their age, they will be in a far better position to avoid these issues when they reach adulthood.
• Strict control over spending
  Micromanaging every dirham spent prevents your children from learning how to manage budgets or spending decisions themselves. So, effective parental advice will create a balance between providing guidance and giving children the autonomy to make their own mistakes and learn from them.

You are your children’s financial guiding light

Your daily financial habits and money talks do more to influence your children than any economics class. While modeling responsible behaviours, empower them to manage finances hands-on from an early age. By avoiding common pitfalls that can undermine positive lessons, you can set your children up for financial awareness for life.