Practical ways to teach your children smart money skills

The switch to digital modes of payment amid Covid-19 highlights the need for parents to instil the value of money

Safa Kidwai and her brother Abdullah are part of the Kidpreneurs programme at the Next Generation School in Dubai, which encourages children to become entrepreneurs and learn money management skills. Safa published a book on Amazon while Abdullah up-cycled used glass jars into charity jars. Photo: Antonie Robertson / The National

Keep it fun and engaging

Stuart Ritchie, director of wealth advice at AES International, says children cannot learn something overnight, so it helps to have a fun routine that keeps them engaged and interested.

“I explain to my daughter that the money I draw from an ATM or the money on my bank card doesn’t just magically appear – it’s money I have earned from my job. I show her how this works by giving her little chores around the house so she can earn pocket money,” says Mr Ritchie.

His daughter is allowed to spend half of her pocket money, while the other half goes into a bank account. When this money hits a certain milestone, Mr Ritchie rewards his daughter with a small lump sum.

He also recommends books that teach the importance of money management for children, such as The Squirrel Manifesto by Ric Edelman and Jean Edelman.

Safa Kidwai might be just 12 years old, but she's already written her first novel – a murder mystery – and published it on Amazon. She also raised money selling the book at an event organised by her school, which has helped her to learn the basics of money management.

The young novelist is part of the Kidpreneurs programme run by the Next Generation School in Dubai, which encourages students to develop business plans and turn them into reality by running their business at school events. The students conduct transactions using a mock currency called "NGees", which helps them​ develop a deeper understanding of how to handle money, plan effectively and manage their finances.

The grade 7 student enrolled in the programme four years ago. In grade three, she was selling science kits but after two years, she moved on to writing books. She gets them printed, bound and sells them as a series of books. She has now expanded her business to offer book recommendations to other children.

Safa's younger brother Abdullah, 7, also participates in the Kidpreneurs programme – his business niche is upcycling used glass jars into sadaqah (charity) jars.

“I put in a lot of planning and effort to earn money and when I earn it, I have to spend it judiciously,” says Safa.

Abdullah says the process of planning, creating and selling products is fun. "Getting rewarded for it is the icing on the cake. Until now, I have donated all my money to charity," he tells The National.

The Kidpreneurs programme is run using the school currency called NGees. Students can use the NGees – 100 NGees equals Dh1 – to buy and sell items at the school's market and are encouraged to put a certain amount of their earnings in the sadaqah boxes that are dotted around the school.

“With this programme, my kids learned the basic requirements of getting a business started and, at the same time, learned how to use money wisely,” says Asma Qidwai, mother of Safa and Abdullah. “The Kidpreneur has helped my children learn how to manage their finances, how to plan their spending and save for their next business plan.”

According to research commissioned by the University of Cambridge in 2013, adult money habits are set by the age of seven years. The findings reveal that by the age of seven, most children have grasped how to recognise the value of money and to count it. They also understand that money can be exchanged for goods, as well as what it means to earn money and what income is.

The Kidpreneurs initiative at Next Generation School starts from grade 1 ​and is open to all students up to grade 8.

A child at the Next Generation School in Dubai uses a mock currency to buy and sell items at the marketplace. Photo: Courtesy Next Generation School

“We have a lot of interest in the programme," says Jeewan Chanicka, superintendent of Next Generation School. "We have shared information about this with other international American schools around the world.”

The NGees currency raised by students at the school's weekly market is collected at the end of the year and converted into dirhams. The students then donate the money to the Dubai-based Dar al Ber Society to fund charity projects.

“One year, we raised approximately Dh5,800 and through Dar al Ber, the students decided to pay for the digging of three wells,” Mr Chanicka adds.

The school devised the programme for students to develop the skills to become successful entrepreneurs and strengthen their financial literacy skills by learning the value of saving and spending. However, the Kidpreneurs programme is currently on hold because of the Covid-19 restrictions.

According to a study by Dubai-based tech start-up Periscope, 90 per cent of parents said the schools their children attend do not teach them money management. The remaining 10 per cent of respondents said ad hoc workshops on money management organised by schools were ineffective.

The study also revealed that 56 per cent of parents in the UAE are not confident enough or do not know how to teach money management to their children effectively.

Periscope used the results of the study to identify an underserved market and are now working on an app that focuses on teaching kids the four pillars of financial literacy: earning, saving, spending and giving, says Smeetha Ghosh, the company's founder and chief executive.

Cashee will be launched in the first quarter of next year and Periscope is currently in partnership talks with banks and financial institutions, she adds.

“Covid-19 has significantly increased the adoption of digital methods of payment," Ms Ghosh says. "What kids are growing up watching is things being bought at the tap of a phone or the click of a button.

Smeetha Ghosh, founder and chief executive of Dubai-based start-up Periscope, is working on an app called Cashee which will teach money management to children between six to 18 years. Photo: Pawan Singh / The National

“Unless kids see money in a physical form, it’s very difficult to explain its value to them. This is leading to a dilemma among parents,” she adds.

Cashee is a pre-paid card and a money management application for children aged from six to 18 years. The app is managed by parents and their children can also access and view their accounts.

The app works on a subscription-based model, either on an annual or monthly basis. While the subscription rate has yet to be fixed, one subscription can cater to a family of up to five children. The parent can choose whether a child gets a digital card (a card on the phone linked to a wallet such as Apple Pay or Samsung Pay), a physical card or both.

Once a partner bank issues a pre-paid card, the parent can transfer funds from any bank account, debit card or credit card to the Cashee pre-paid card.

The objective of Cashee is to educate and empower children to teach them about money management by linking everyday activities to the app, such as goals, chores

“It is like a first bank account for the child with separate sub-wallets for current account, saving [and] spending. Kids can transfer money between these sub-wallets. The parent will get a notification each time the kid makes a transaction,” Ms Ghosh adds.

Parents can instantly add funds to the account, transfer money, block any transaction if they feel something is suspicious, change the PIN, request for a new card or change spending limits.

“The objective of Cashee is to educate and empower children to teach them about money management by linking everyday activities to the app, such as goals and chores. Meanwhile, kids can track their earning, spending, saving and many other functionalities,” Ms Ghosh says.

Periscope plans to eventually have an Arabic version of the app and will expand its presence in markets such as Egypt and Saudi Arabia.

National Bonds is also doing its share to encourage youth to adopt a culture of saving, and organises monthly draws that give away thousands of prizes dedicated to minors through its Rewards Programme, which was relaunched in June this year.

Following the implementation of the programme, National Bonds registered an increase of 18 per cent in transactions by minor bondholders from June to October compared with the same period in 2019. Around 24 per cent of total National Bond account holders are minors, of which 53 per cent are male and 47 per cent are female.

“The rewards for minors were developed as an initiative for National Bonds to better engage with the community,” Saqib Mahmood, chief commercial officer of National Bonds, says. “Educating the young people in our community on the importance of saving at an early age will make them financially responsible and ensure they develop a sound approach towards managing money.”

National Bonds gives away more than 2,000 prizes a month to minor account holders under the Rewards Programme, which range from Dh50 to Dh5,000. Minor account holders are also eligible for the monthly Tesla car draw, quarterly Nissan Patrol giveaway for UAE nationals and the quarterly Dh1 million prize draw.

Since 2006, the Rewards Programme has turned 17 youths into millionaires, while more than Dh70m has been distributed to over 53,500 minor winners. The average annual return for a minor portfolio in 2019 was 2.5 per cent, according to National Bonds, which also visited more than 25 schools in the UAE last year to raise awareness and teach the importance of savings.

Meanwhile, Emirates Foundation has been running the Esref Sah programme to promote financial awareness among Emirati youth since 2013. It teaches them how to avoid excessive debt and manage their finances through financial literacy workshops, a bank training programme and Esref Sah's volunteer programme, Shabaab Club.

The financial literacy workshops are targeted at high school and college students in the UAE. The bank training educates bank employees on the right ways to market their products to young Emiratis. The Shabab Club trains Emirati youth to act as mentors to their peers and champion the cause of financial literacy. Around 100 mentors are on board with Esref Sah and are actively promoting financial literacy in their workplaces and communities.

Similarly, Injaz UAE also organises programmes with corporate volunteers to educate school and university students about the basics of stock market investing and the fundamentals of personal finance, budgeting and risk management.

Keep it fun and engaging

Stuart Ritchie, director of wealth advice at AES International, says children cannot learn something overnight, so it helps to have a fun routine that keeps them engaged and interested.

“I explain to my daughter that the money I draw from an ATM or the money on my bank card doesn’t just magically appear – it’s money I have earned from my job. I show her how this works by giving her little chores around the house so she can earn pocket money,” says Mr Ritchie.

His daughter is allowed to spend half of her pocket money, while the other half goes into a bank account. When this money hits a certain milestone, Mr Ritchie rewards his daughter with a small lump sum.

He also recommends books that teach the importance of money management for children, such as The Squirrel Manifesto by Ric Edelman and Jean Edelman.