On growing up, there are many things that youngsters learn to handle and take responsibility for. While some of these are adult things, such as doing a job, driving a car, cooking a meal, buying their own stuff and what not, there are other things that are helpful to learn how to do from a young age. Handling money is one of those things.
I am sure most kids know what money is and what it is used for. They may have some of their own too, in the form of pocket money, eidi and as a gift on different occasions. And they all enjoyed spending it on chips, drinks, toys and so many other things. Some of youngsters also save money to buy something special and expensive, while a few give it to their parents for safekeeping.
All of these are common ways in which money is used in childhood, but as we grow older, its usage takes on a whole new and often more complicated meaning. Then money needs to be considered in terms of earning, expenses, budgeting, savings and investments, to mention just a few things. It is not possible to just wake up one fine day and become money savvy or make the right decisions about using money wisely.
Money is only as important as the use to which it is put. It is useless if you waste it, and it is very useful if you utilise it wisely and save it smartly. You have power over it, so you need to learn to exercise that power wisely, after all, “With great power comes great responsibility.”
Children have to learn the value of money and how to handle it smartly from a young age to develop some sensible financial habits, because habits learnt at a young age have great influence when they grow older. But this is not to say that they can’t learn things when they are an adult, it is just that the younger they start with being money wise, the better it is for them.
Moreover, in today’s world of credit cards, online banking, ATMs and cashless transactions, there is the danger that many people, both adults and children, can lose sight of the fact that any spending or transaction being done electronically takes place without our wallets becoming empty or cash leaving our hands. This can take away the whole feeling of having spent money on something.
With credit cards, we do not have to worry about paying for something we are buying right now, but we will have to do it eventually and for that we have to earn, budget and save money. Spending money without first saving it is a sure shot formula for going into debt.
But I want to make it clear that nothing that is going to be discussed here implies that money is very important — no, money is only as important as the use to which it is put. It is useless if you waste it, and it is very useful if you utilise it wisely and save it smartly. You have power over it, so you need to learn to exercise that power wisely, after all, “With great power comes great responsibility.”
Where’s the money?
Money is earned, in some cases it is also given or gifted, and even the money that one gets as a gift on birthdays or Eid, had to be first earned by someone.
There are some people who earn thousands in a single day while others barely make a few hundred rupees after working all day. And for these two kinds of people money has different values — the one who earns in thousands will not think much about dishing out a couple of thousand rupees on a single meal, while the one who earns a couple of hundred rupees a day will try to get at least two, if not three, meals for his family with this amount.
Ideally, divide money in three ways — for spending on whatever you want with the permission of your parents, for saving to be used later and for giving away in charity.”
So what money means to different people depends upon their earnings and savings, and their spending reflects this too. It is a bit rude to ask people how much they earn, but youngsters should have a general idea about the income, financial standing and monthly budget of their family to be able to understand how they should be spending or requesting their parents to spend.
This is particularly important when children go out shopping with parents. This will help them understand what they can demand their parents to buy for them and what is too expensive to get unless it is a necessity and need.
So when demanding to eat a burger from the newest restaurant in town, or a particular dress, children should try to learn if it is falling within the budget of the family at that particular time of the month. Yes, time is also important as both salaried and business people get money at a particular time and then have to make it last until it is pay day again. And, generally, towards the end of the month, the spending budget or capacity of most people gets very low, so all non-urgent expenses should be left for the time when cash flows in again.
Needs and wants
Many of children probably have a concept of these two terms. For instance, one ‘needs’ food but one ‘wants’ eat a burger from an expensive fast food joint. Sensibly speaking, one should meet one’s need first — which in this case can be fulfilled well with anything cooked at home — and only go for fulfilling their wants if there is enough money to spare from more pressing needs.
So it is essential that children should understand from an early age what they need and what can be put off in favour of saving money for later use. This will help them a lot when they start earning and have to manage a budget to last them until the next pay day.
Learning to budget
One of the best ways to learn how to use and spend money wisely is for a youngster to have some money of their own and plan how to spend it.
This is not to say that all kids should get pocket money. I didn’t get pocket money when I was a kid as my parents could not afford to give me extra money every month to do what I liked with it after they fulfilled all my needs and some wants too. Or maybe they did have some to spare but the thought or need of regular pocket money never occurred to them or me. So youngsters should not be asking them for pocket money if they are not given any.
But every child gets cash in different ways at different times of the year through cash gifts. These can be used wisely in the following ways. Ideally, divide money in three ways — for spending on whatever you want with the permission of your parents, for saving to be used later and for giving away in charity.
The last one is very important as unless we develop the habit of helping those less fortunate than us, we will not remember to do so when we grow older. And don’t think that a couple of rupees are too less to give away and will not make a difference to anyone. To Allah, a person who has less but shares that, is far greater than one who has a lot to spare and gives away some from it.
And another important thing about budgeting is to make sure that one spends money in such a way that it doesn’t finish in one go or too soon, and one is left with nothing for a long time.
For instance, if a child gets a hundred rupees to spend at the school canteen and they don’t get this amount every day, then it should not be spent all in one go by getting a drink, chips, rolls and whatever else that comes in that amount in one day. Get just one thing each day, for instance, a packet of chips on the first day, then save the rest of the money to buy a drink on a hot day.
Before going out, adults often make mental notes of things to buy or a shopping list. Children can start by helping parents make the shopping list and try to limit the purchases to only those things. This helps to avoid overspending because in superstores it is very easy to over spend as one walk down the aisles, putting things in the shopping basket.
It is also smart to compare prices of similar items on the shelves to see which ones are on a discount and do remember that taxes are frequently added at the cash counter so that should be taken into account.
The best way to use the credit card is to only spend that much amount which can be paid off the very next month, otherwise one can easily fall into the debt trap.”
When paying in cash, it is easy to see how much money one is spending and how much is left. But this is not possible when payment is made through credit/debit card, online payment/transfer and online shopping — we just don’t feel we have less money than we had before.
So when trying to keep track of spendings and savings, it is best to avoid these cashless transactions and stick to only the amount one had planned to spend. And the best way to use the credit card is to only spend that much amount which can be paid off the very next month, otherwise one can easily fall into the debt trap.
So these were just some of important money related matters that everyone needs to know from a young age to understand and use money better, both now when parents are taking care of the financially needs of youngsters and when they grow up and have to earn and budget their own income.
This article was originally published in Dawn, Young World, July 27th, 2019. Read it here