A young perspective on smart saving habits

Give your children a healthy allowance to teach them early lessons on financial responsibility and accountability.

Gary Clement for The National

“Where do you get the Dh4 from?” asks my 10-year-old. “Do you take it from someone’s account?”. That’s my boy. Making sure he knows what he’s getting into, and obviously a rottweiler interviewer in the making. He’s discussing the finer detail of his contract with a manager while his very first bank account is being created. His ethics-dar (as in ethics radar) is pinging – the concern: if they fund the promised 4 per cent interest by dipping into others’ savings, they could do the same to him.

We’re not in the UAE – it’s quite the bureaucratic challenge for me to fix him up with an account in the Emirates as I am the female parent – so no bank accounts for my children in-country, unfortunately.

But we’ve landed on a lucrative (by today’s standards) offer in the UK. The equivalent of Dh4 for every Dh100 saved for a year from the date of opening the account.

That’s how I explained it to him. Which, technically, means he’ll only get that full Dh4 return for the money that is put in that very first day – capped at Dh500 per month – as the offer runs for a year only.

The bank manager was taken aback. The thought bubble above my head said all manner of things about how banks make their money – luckily for him, the manager recovered enough to give a couple of examples of how banks charge for things – like loans.

Satisfied with the answer, there was a flurry of signature and ceremony. After which we went for a celebratory chow-down and chat. We’d already had pre-emptive discussions in the lead-up. They included delving into what he would be fin­ancially responsible for: things like birthday gifts for his friends and non essential items like crystals or fossils – or the occasional treat.

It’s been fantastic having these discussions because it reveals his very clear ideas around par­ental monetary responsibility and accountability and gets him to think through social contracts like buying gifts.

I think it’s vital that we have these talks with our children, but then go on to live it. By handing over a chunk of money that they can actually do something with.

Bits of token cash, either as regular pocket money or handed out when requested, does no good. It instils the behaviour (and thereafter the belief) that money, and what it buys, can materialise – somehow. (Read: future loans, debt, borrowing. Because I’m worth it.)

Since opening up an account we’ve been to a fair. We discussed his budget for the event. He took it out in cash and had total control over how he spent it.

He’s still getting a feel for what money actually buys – the value of things – eg Dh10 buys very little these days. He thinks that’s enough for him to take out each month as spending money – bar special occasions, like the fair. He decided Dh33 would do him – and still had change when we left. How great is that?

So, point one I’m making is that we must hand over enough money for our young ones to be able to do something with, and have clear lines of how it can be used. For example, you could decide that any spending over Dh100 needs to be after a discussion. The second issue is: it needs to be about handling cash, not cards. I’m going on about this because we live in an increasingly cashless world. It’s detrimental for our young ones (and some of our older ones too). We need that grounding that comes with handling hard cash – money made up of coins and paper. Studies show that we send more when we don’t use cash.

We need that emotional tug of decision making that comes with knowing what you have and how you can use it. And yes, it comes with handling cash. I can’t say it often enough. We must experience the pain, and pleasure, of paying for things – in cash.

One last thing: set up a money routine too. It’ll become habit for life.

In our case, my son is saving 80 per cent of his pocket money. His decision. He decided he lacks for nothing – but still wants to have some money in his pocket for the odd thing.

He declared he’s saving up for his first flat that he’ll buy in the town where he wants to go to university. Again, his decision. He told me even if he doesn’t end up going there, he can rent it out and make money off of it. Or if he can, he’ll buy it before he needs to use it, so that he can earn from it. I love what I hear. Of course all this will change at some point. But it’s good to hear. He then went on to say a profound few sentences. I unfolded a napkin and quickly wrote them down – and asked him to date and sign it.

He read it. Froze. And refused to sign it. “What if I break my promise?” he exclaimed – quite worried. Ah, wise beyond his years this one.

He calmed down. We talked it through. And he signed.

I’m keeping that napkin for the decades to come – just in case he needs a gentle reminder.

A 10-year-old’s self-initiated declaration:

I will keep my promise.

I will not spend money I don’t have.

I will save 80 per cent of all my money.

I think quite a few adults could do with printing this little gem and sticking it on their bathroom mirror – adjusting the percentage to suit their lives. Adhering to this means no bank will ever dip into our accounts to pay others the 4 per cent.

Nima Abu Wardeh describes herself using three words: Person. Parent. Pupil. Each day she works out which one gets priority, sharing her journey on finding-nima.com

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