Teaching children about growing money is a lot easier than teaching them about the proverbial birds and the bees. The main reason for this would be that we can teach practical lessons about money. Children like to engage their sensory perceptions early. The right time to teach them about growing money is when they begin to understand concepts and have a basic understanding of arithmetic and the application of numbers. Teaching children about growing money is not synonymous with teaching them its value. Below are a few ways one can teach children about growing money.

THE RIGHT ATTITUDE

Thinking that you’re going to have a few grand tomorrow isn’t going to guarantee it. However, attitudes about money tend to be pervasive. Your own attitudes towards wealth accumulation may heavily influence children. It is important to impress on the young ones that money is a means to an end. With regard to actually growing money, children must understand that if they want something they should ask themselves “how can I afford it?”. Of course, with proper parenting the answer should be legal.

THE PIGGY BANK CONCEPT

Whether it’s the piggy bank or the old cookie jar, children would be able to understand the growth of money in a tangible way. They would be able to see and feel their savings grow before they grasp more complex issues like money value. Providing incentives to full the jar would be a welcome way of getting having them imbued with good savings habits. When they have explicit reasons for putting money in the jar, they would acquire a practical understanding of savings objectives and exercising discipline in sticking to a goal.

PLAYING MONEY-GAMES LIKE MONOPOLY

When my sister started playing the game, she felt richer when she had more “money” in hand. She soon realised that if you only made the rounds paying rent to other players, your money would dwindle. From this simple game, the concept of assets and asset value can be understood. Children would also learn the process of bargaining and negotiating, which would help them grow income-earning assets, not just money. Children would realise from playing a game such as this that an offer is not necessarily a bargain just because one’s selling price is higher than the cost price. I used to win a lot of games by enticing nave players with exorbitant offers early in the game.

ALLOWANCES

These can either aid or distort a child’s life lesson where money is concerned. The allowance should not be too high as this would not help the child understand basic concepts of scarcity and choice. The child would realise that the opportunity cost of spending is saving by having a limited allowance. Allowances are a way of empowering the child so that they assume financial responsibility earlier, albeit in a limited sense. As a child, I understood fully that if I wanted something way above my allowance, I’d have to save to get it.

SAVINGS ACCOUNTS FOR COMPOUNDING INTEREST

Children should be introduced to savings accounts as early as age six. They should learn the difference between simple and compound interest by age seven at latest. This would build on the simple accumulation that they learned from the piggy bank concept. The principle of compound interest should be married with the concept of money at work later. Children would understand that investing would cause money to produce even more money; a fundamental concept of wealth accumulation.

SOURCES OF INCOME

It’s good to have children explore the various wealth-generating activities that they can be involved with. They would probably already have an allowance, but having alternative sources of income would ensure that they can think in terms of how they can afford something. If the activity requires them to use some of their savings, they’ll understand how capital can help create income.

Whatever combination of methods is used to teach children about growing money, it should open their minds to possibilities. The end-result is that the child must have the right balance between prudence and ambition where money is concerned.