The Tribune

Of all the things parents decide to have a serious conversation with their children about, money rarely makes the list. That is understandable but unfortunate. Understandable because of the significant negative consequences associated with many of the other topics discussed, and unfortunate because understanding the role of money in society is critical to everyday life.

Your children will learn about money. That is inescapable. The question is not whether or not to teach them about it. Rather, the question for every parent is how they want their child to learn about it. I do not believe any parent would actively choose to have their child learn about something important through a series of random lessons, and with random content at random intervals. If you thought it was worth the time to teach your children to do something as basic and fundamental as crossing the street, it is worth spending the time to teach them how to navigate money matters well before they find themselves standing at a financial crossroads. Prudent use of money is a critical skill with long-term repercussions for both their lives and yours.

Start the conversation with a simple question, such as: "What do you know about money?" and proceed from there. Make your topics of conversation, and answers to their questions, simple and concrete. Explain to them as much as they are able to understand, and use examples from their experiences that will be immediately relevant. Remember that with teenagers, as much as with younger children, teaching requires patience and persistence. Clear up their misconceptions with facts, but also give them the opportunity to learn through trial and error. Repeat lessons often because you never know which conversation will be the one that changes their perspective or be remembered decades later. That way, with your guidance, they can improve their financial knowledge and skills in a low-risk environment.

Discuss the thought processes that go into making family financial decisions, and involve them in financial choices that will affect them directly. Give them enough to make them financially aware, but not so much as to cause financial concern (that responsibility is all yours). Also, gift your offspring the tremendous benefit of your experience by being honest and open about the mistakes you have made with money. Real world examples, involving someone they know and care about, are likely to have even more impact.

A coin jar is a simple start. Having your kids save money in it, and asking to take money out, will increase their mental awareness and appreciation for money. The process of opening and maintaining a bank account with a teenager is another way to promote awareness and responsibility. To internalise the concept of wages and work, you could pay your children a nominal fee for doing chores around the house. This might also be an opportune time to explain the importance of - and difference between - helping for free (volunteering) and working for a fee (earning). If you are morally opposed to paying for routine chores, you could devise other ways for your children to earn money, such as painting the house, cleaning the garage or simply giving them an allowance to manage. Alternatively, you could help your teenager find a part-time job as long as it does not interfere with their academics.

In any case, have your children go through the exercise of setting a goal for how much they want to save for themselves or a future purchase. If your teenager has a part-time job, introduce him or her to the discipline of saving by requiring they set aside at least 10 per cent of their earnings. The time it takes for any of your children to accumulate savings before they reach those goals will demonstrate the concept of delayed gratification.

Also, since the amount of money your child can save is limited, it presents an opportunity for him or her to think about trade-offs. Let your child figure out how to choose or prioritise among the multiple things he or she will likely want to buy. If the child insists on buying more than can be afforded, that might be the perfect time to teach about borrowing by lending them money and charging them for it (i.e., an interest rate). For the net savers or those needing a little more encouragement to do so, you could teach your child about savings rates by giving him or her a little extra for spending less and keeping more.

Learning exercises are great, but children are always watching even when you think they are not, so use your actions as a means to teach them as well. Spending money looks easy to children because they do not see the manoeuvering and calculations going on behind the scenes. Pay bills with your teenager present so they understand living expenses versus leisure spending. Talk to your children about cost comparison and budgeting in preparation for a trip to the food store. Show them the loan schedule for how much the family pays every month, and how much a lender wants back in total for the car they ride around in every day or the roof they sleep under every night.

Whether you show them, tell them, or teach them, your children will inevitably make mistakes along the way. Sometimes they might spend all their savings on some trendy style choice, regret an impulsive purchase after the fact, lose their allowance at school, or lend money to the wrong friend. Do not step in and rescue them all the time. Actions without consequences are not instructive. It is better they learn hard lessons with some guidance from you at a young age than as an adult in the real world where nobody cares and no one explains.

If you want your children to grow up to be financially responsible adults, it is up to you to describe the rules of the game so they know in advance how it works before they play. Start early. Start now.

NB: Ramon Simms is a management professional with more than 10 years' experience in finance, operations and technology. He holds a BA in Financial Economics and an MBA in Entrepreneurship. He is a managing director at IFF Ltd (www.iffpros.com), Bahamas and you can reach him at ramon@iffpros.com