5 Things Your Kids Need To Know About Money
Kids should know how to manage their money. Parents have the opportunity and responsibility to teach their children this basic life skill so that they grow to be financially savvy and secure and avoid making money mistakes Insh’Allah.
The cornerstone of our faith tells us that everything belongs to Allah swt. It is by His blessings that we are given money, some more than others. Above all it is important to remember that everything is a test and we should always show gratitude to the Almighty for His favors upon us.
The concepts outlined below are equally applicable to kids from elementary school to high school, and the earlier these ideas are explained to children, the easier it becomes for older teens to make smarter financial decisions. By including children in the family’s financial decision-making process (such as when deciding which family car to buy, etc) we are able to reinforce the idea of wants versus needs.
1. Understand the Value of Hard Work
Some parents give a set allowance each week unconditionally, others ask their children to do chores in return for money and many parents don’t give an allowance at all, preferring instead to make all the financial decisions for the kids themselves. However kids receive money, whether earned or gifted, they need to understand that it does not come easily.
By taking advantage of teachable moments, parents can slowly instill in their children the importance and value of hard work. Allah swt likes it when we work hard and He expects the very best effort from us at all times. This is Ihsaan.
Allow your kids to earn money by encouraging entrepreneurship and coming up with some money making ideas that are age appropriate (some examples are pet-sitting, babysitting, mowing lawns, part time or weekend job, etc..)
2. Spend thoughtfully
Teach your children to track their spending. By writing every expense down it becomes easier for a child to see where their money is going and prompts them to make better decisions and improve their spending habits.
Encourage your kids to shop smarter. By taking advantage of sales and coupons, show them that they can get more for their money.
Discuss the importance of using credit cards correctly, so that children understand early on that they should only charge to the card what they are sure they can pay off entirely at the end of the month.
3. Save Regularly
Teach your kids to put a portion of their money into a savings jar or account on a regular basis. By encouraging this simple habit, it is likely that it will continue into adulthood and they will always have an emergency fund available if needed.
If there is a large, expensive item that a child wants to buy, encourage them to save for it. Waiting to buy something that they want by setting long term goals teaches them about trade offs. For example, by forgoing weekly vending machine snacks at the masjid, they can instead put those dollars in a saving jar to buy the new toy that they want. It’s not an easy thing to do, especially for children, but understanding the opportunity cost can instill the concept of delayed gratification, which is a huge predictor of success.
4. Give Generously
Encourage giving back by reminding kids of the pillar of Zakat. Let your children see you openly give to the needy or worthwhile causes while encouraging them to also donate in secret because Allah swt is always watching and loves such deeds. Also explain that whatever they give in sadaqah seeking Allah’s pleasure, comes back to them, along with His Barakah.
5. Be Content
Alhamdulillah for everything. One of the biggest things we can teach our children is to be grateful for whatever they have, because there is always someone else who has so much less. They should understand that things do not fill the soul and are not the cause of happiness, nor is the lack of such material goods the cause of unhappiness. It is through serving and helping others and giving back to the community that we will truly find peace and Insh’Allah prosper.