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3 easy lessons that will transform your children's money habits today [plus 3 lessons for parents included]

By Sam Instone - December 11, 2019

Living in Dubai, luxury doesn't surprise me.

Supercars, mansions and gold-plated everything abound.

But I worry about the impact this type of extravagance may have upon children.

Here's why.

I still want my children to reflect the upbringing I had growing up.

Spending time being kids.

Getting dirty.

Climbing trees.

Riding bicycles.

Kicking around a ball.

Earning pocket money washing cars or with a paper round.

Nowadays, I don't see many children in Dubai having 'real' childhoods.

Instead, they seem to be at expensive birthday parties or shopping in giant malls.

Aspiring to buy goods I can't imagine they understand the true value of.

Or, the many days of work or conscious saving needed to afford them.

As a parent, I'm guilty of spoiling my children from time to time.

But I remind them that I am able to provide these nice things because I have worked hard and saved for many years.

And hopefully they will do the same.

So here's what I teach them on a regular basis.

I'd love to hear what inspires your own conversations with your children.

Father talking to son

Lesson #1: Money is earned by hard work

As a child, I remember thinking that money was magically produced by the ATM.

My father would punch in the numbers and the cash would be created right there and then.

I hadn't realised that the money produced was how much my father had in his bank account.

It was money my father earned.

It's important to tell your children where the money is actually coming from.

And that the more they withdraw from an account or savings jar...

The less there will be in the end.

As adults, we know money is finite.

Our children need to know that too.

Money can, and will, eventually come to an end if it's not managed properly.

Let your children start earning money for chores or good behaviour.

Research shows the earlier, the better.

It sounds like an obvious thing to do.

But subconsciously they'll start learning that to have money, they need to earn it.

To earn it, they need to work for it.

Lesson #2: The importance of saving and investing

Saving is a virtue.

The benefits are realised over a period of time.

Teach your children there’s more to money than spending.

And teach them by example – through your own saving habits.

If your child wants a videogame or a pair of the latest sneakers, ask about the cost.

Explain how much they'll need to save every month to afford it.

Recognising these items are not easily attainable will help your child realise their value.

They'll also understand how to work towards a financial goal.

And that if they save more every month, they can reach that goal sooner.

I find having a jar, money bank or chart helps.

My children enjoy watching their savings grow and the sum of money get bigger.

It gamifies the idea of saving and appeals to younger children especially.

Lesson #3: The dangers of debt

This probably isn’t a lesson for very young children.

But teenagers can certainly grasp it.

Discuss things like loans, credit cards and other debts with your children.

If you want them to learn first-hand...

You can let them take out a loan from you.

You can offer them the money with proper repayment terms.

And if they default on paying you back, you add interest.

They'll soon be able to see how debt reduces the amount they have left to pay for other things.

And how keeping track of repayments can become overwhelming.

Child counting money

Your children's future starts with you

Teaching kids about money is important.

No one argues that you should teach them but it's about how you do it.

I recommend three guiding principles you can use to effectively teach your children:

1. Educate yourself

Learn as much as possible about budgeting, saving, investing, cutting expenses and reducing debt.

Become a good teacher, armed with all the knowledge you need.

Then share what you've learned with your children.

2. Lead by example

Children don’t understand when you tell them things.

Instead, they understand when you show them.

So, if you are teaching them to work well with their money but you are doing the complete opposite...

They’re more likely to follow your actions, not your words.

You have to lead by example.

3. Teach them one habit at a time

Don’t expect your children to become skilled financial planners overnight.

Your goal should be to teach them about money over the course of their childhood and adolescence.

One lesson at a time, patiently.

And then move on to the next.

The gift that keeps on giving

Teaching your children about money also ensures the life and wealth you've built today...

Will be passed down many generations.

Considering most family fortunes rarely make it to the third generation...

Financial education is one way of making it last.

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P.S. There are many books that weave the importance of good financial habits into interesting stories for children.

Here are a few I highly recommend:

For kids: 

  • The Squirrel Manifesto by Ric Edelman and Jean Edelman
  • Those Shoes by Maribeth Boelts
  • Bunny Money by Rosemary Wells

For teens: 

  • Millionaire Teacher by Andrew Hallam
  • Rich Dad Poor Dad For Teens by Robert Kiyosaki

Finally, before I sign off, here are a few websites to keep your children edutained:

Kids Finance Initiative

Kids' Finance

Sense and Dollars