Nurturing fiscal responsibility

In today's money-orientated world, many parents consider it important to teach their children how to be financially aware and responsible. Too many young adults get into financial difficulties, so the sooner children understand the basics the better. They are generally curious about money from an early age, so it's a good idea to take advantage of this natural tendency. The teaching can start when they are relatively young with the concept of earning and spending money. The basics of mummy and daddy working to earn money that pays for their home, food, toys and schooling can be explained as they simply need to understand the connection.

It's a good idea to get them used to different coins and notes once they can read numbers, and it helps with mathematics, too. Children like to copy their parents, so encouraging them to understand prices and values should be relatively easy. Take them shopping with you and encourage them to compare prices for different brands of the same item. It's an unusual child who doesn't like sweets and most will soon become interested in working out which offers the best value for the dirhams in their pocket.

It can become a game, especially when related to things they like. Gradually, what seems to be a game becomes an important lesson. When using credit cards, parents should explain that these transactions represent real money, and they are not a magic way of spending without consequences. Most parents give their children pocket money, but it is important that it be valued, rather than taken for granted; a reward, not an expectation. Even from around age four, pocket money can be paid as a reward for simple tasks, such as putting away toys or helping with housework.

Give your child their own money box and praise them for putting money aside to pay for treats. They can then save up to buy things that they want, with the theory being that the effort involved will endow the item bought with more value. Praise for their efforts is essential and this soon becomes a habit. As the child gets older it is normal for amounts of pocket money to increase, but so can the chores required.

Children do not generally take a long-term view on life, and actual investing - that is, into equity markets, stocks, bonds, shares and the like - is too difficult a concept to grasp, particularly the angle of risking capital. What does make sense, however, is opening a bank account in the child's name. Few banks in the UAE offer specific children's accounts ,and they may be missing a trick here. Others will allow accounts to be opened for the children of existing account holders, which means that it is nominally in their name, but requires the assistance of the parent for any transactions. Nevertheless, the child can monitor account balances and make transactions just like an adult.

Hopefully there will be more deposits than withdrawals, and these will develop into a good long-term habit.