Why teaching kids the basics of money is important
Teaching kids about money does a lot for the children’s cognitive development and future prospects
My daughter, who is studying in one of the reputed schools in Dhaka, really enjoys buying tiffin from her school canteen. Despite being an early-stage primary school student, we have allowed her to purchase tiffin from the canteen once a month. The idea is to let her handle the buying decision independently.
I know her school canteen menu and prices, and I always give her some extra money so that she can bring some change back. However, on most days, she is unable to retain the extra Tk5-10. I asked her why? According to her, the canteen operator tells her he has no small notes and asks her to come the next day. When she goes there the next day, or the day after, the response is the same.
Now, she does not even want to go and ask, and the same is true for all the other kids. Not returning a small amount of money may not mean much to an adult, but it means a lot to the psychology of a child. Are we teaching our kids to take things for granted?
Kids have no idea what things cost. When they are very young, there's no difference between the cost of crackers and a toy. To take things one step further, there's no difference between a low-priced toy and a high-priced one. Price is meaningless to them.
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Older kids may know what things cost, but they may have little idea about whether they are getting value for their money. They may know that a pair of shoes costs Taka 1,000, but are they worth the money?
That is why it is essential to help your child understand what things cost and whether there is value in spending that money. You can always argue whether it is necessary to teach young people about money, but it is hard to argue that knowledge about money is essential in every part of life.
Basically, teaching kids about money does a lot more for children's cognitive development and their future than one might anticipate. Research shows when kids can grasp financial concepts, their critical thinking ability improves and they are less impulsive than others.
Furthermore, their ability to stick to long-term goals rather than giving in to immediate pleasures grows stronger. For example – they may tend to save the Eid salami money to buy their favourite book, rather than spend it on candy.
Without proper knowledge of money, it is difficult to differentiate necessities and luxuries. Children must understand that weekly grocery bills are necessities, while a monthly dinner out can be classified as a luxury (even though you may feel like you need it). Having a pair of shoes that fits is a necessity, but having a second pair for a party is a luxury.
When a kid understands the distinction between these two early on, they will be a good purchase decision-maker when they are older. Furthermore, it helps them to grow the money, or at least it will create the desire to grow the money.
There is a big difference between wanting money and wanting to make money. Making money involves work. Kids value the money they have worked for, more than the money they were handed. This desire to grow money in one's cognitive brain may give birth to the country's future entrepreneurs.
Small businesses are the backbone of the economy. Small businesses employ almost all private sector workforce, and for the last twenty years, small businesses have been responsible for creating new jobs. Small businesses actually lead the way in innovation.
Obviously, a country needs doctors, lawyers, engineers, accountants etc., but surely we also need entrepreneurs to develop something new for the economy. This is why we need to think about how we can pay it forward and help inspire children to think like early entrepreneurs by teaching them the basics of money.
Dr Mohammad Naveed Ahmed is the Managing Director of Miyako Appliance Limited, Bangladesh and the first Doctor of Business Administration from IBA, University of Dhaka. He is also an Adjunct Associate Professor of SBE, Independent University Bangladesh.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.
