For many young people, going off to university means managing money for the first time. But there are simple ways for parents to equip them with knowledge beforehand.
Teach your teenager financial literacy before they head to university
Every time Jude Bonner's 16-year-old son, James, wanted to go snowboarding or kitesurfing with his friends, she simply opened her wallet and handed him the cash.
But with three kitesurfing lessons a month costing Dh350 a session and two snowboarding lessons at Dh200 each, the British housewife quickly realised she was spending far more on her son's hobbies than she wanted to.
"Once I factored in trips to the cinema and pizza with friends, I was spending up to Dh2,000 a month," says Mrs Bonner, a former relocation expert who moved to the UAE in 2006 after her husband, a telecoms executive, took up a new position in Dubai.
"I converted it back into pounds and nearly had a heart attack. That was when I knew I needed to give him an allowance that would encompass everything."
Unsure of how much to give her son, Mrs Bonner joined a financial literacy think tank run by Visa, the global payment solutions company, and attended by several other mothers in a similar position. The first meeting was held in May this year, followed by a second session in July with mothers from all walks of life discussing the difficulties of teaching their children the value of money.
"The think tank didn't help me decide the amount I should give James, but it made me think more clearly about not opening my wallet every time he asked," says Mrs Bonner, 52, whose son sets up a handyman business every summer in the UK with his friends and is also a committed fund-raiser for charity.
"Afterwards, we sat him down and said he would receive Dh800 a month plus Dh75 a week for lunch money, which he was OK with because he studies business and economics and likes working out money.
"While the new amount means he cannot do everything as often as he likes, it's about trying to find a reasonable balance. When you've dragged your child halfway around the world, you want them to fit in. But in the UK, his peer group are doing newspaper rounds or working in the local supermarket and you would be much firmer about how much you give. You can't do that here because they all have a BlackBerry and are going out for lunch at Nobu."
Mrs Bonner's concern for her son's financial well-being was not only caused by the amount she was spending to fund his lifestyle, but also because student life is just around the corner.
"We're looking towards university now and I thought he was doing OK because he knows how to do the laundry and how to cook, but I can't imagine him shopping for the week on a budget," she says.
With a large proportion of UAE school leavers heading overseas to university at the end of this month, the time for understanding how to manage their own money is right now.
From opening a student account to securing a student loan and living on a monthly budget that covers their living expenses, new students will have to get their heads around their finances very quickly. Which is why educating teenagers about the financial pitfalls that lie ahead is so important.
"Institutions have a responsibility to teach financial literacy in schools from a young age," says Lama Kabbani, the corporate communications manager for Visa. "My father never taught me about personal finance because in Arabic culture you don't talk about money. The parents don't want the children to be in need so they supply them with as much as they can. When I left university and was working, I had to pay back my student loan and I learnt the hard way."
Visa has run a number of financial literacy campaigns to help educate young people in the UAE about the value of money, including setting up a website (www.moneyskills.me) and supporting schools and universities in the region.
Now, the corporation is developing an education package for teachers to educate their pupils. But as well as teaching the children, Visa realised the parents needed help as well.
"The think tank works because it gives parents an opportunity to exchange ideas and we are learning more about the challenges that parents face dealing with the different age groups."
Lynn Smith, an Australian housewife who moved to the UAE in 2007, believes educating her 15-year-old daughter, Jessica, about money management now rather than in three years' time is key to her future.
"In three years, she'll be off to university and she won't have my bottomless pockets to tap into or know what comes first - a night out with friends or the rent," says Mrs Smith, whose husband, Gary, works in construction.
"If we don't do something positive and constructive without just criticising their spending, they are the ones that will accumulate debt and then carry it with them."
Mrs Smith decided to attend Visa's think tank after struggling to find a suitable bank account in the UAE for her daughter because of the high fees on many accounts.
"We set up an account in 2007, but it cost almost as much as her pocket money every month to maintain it. We had to pay Dh76 a month for a basic account when she was only receiving Dh50 a week pocket money. By the time she took out a few dirhams for spending, it was pointless having it."
Although children's bank accounts do exist in the UAE, with a number of institutions offering accounts dedicated to that sector, they usually have to be attached to the parent's sponsorship and come with hefty fees.
Ammar Shams, the regional head of corporate sustainability for HSBC Bank Middle East, says having accounts for children is not necessarily the number one priority for banks in the UAE.
"The world's banking system has changed and they are not able to offer customers what they had before. It's really a question of what you can do with the resources you have and in a nation where 80 per of the nation are expatriates - many of whom will only spend a few years here - it's not necessarily a very high priority market for banks.
"At HSBC, for example, we are limited by Central Bank regulations to only having eight branches - something that applies to all international banks - so we have to evaluate how many people we can reasonably accommodate and be a little more selective on the services we can offer."
However, Mr Shams says parents should not be deterred by this and advises them to look at other ways to manage their teenagers' monthly allowances. He suggests creating an account at home, where the child can see their balance on a spreadsheet. Parents can also open an online bank account or children can simply store cash in a money bank.
"There are many ways of creating an account for your child without physically going into a bank and opening one. My nephews and nieces are flush with cash during Eid and on their birthdays, but rather than spending it, they give it to my brother, who keeps it in a wallet in a safe ready for their next big-ticket item. They can physically see how much they have in their wallet whenever they want."
Mrs Smith, however, believes not having a bank account makes teenagers in the UAE a security risk.
"There are teenagers walking around with fistfuls of dirhams in their wallets, sometimes over Dh1,000 at any one time because they have nowhere to put it," she says. "Would we give our child a couple of hundred dollars to wander round the streets with in another country? No way."
Mrs Smith's other concern was how to manage her daughter's spending. Before attending the think tank, she was giving Jessica Dh100 a week - an amount her daughter would just fritter away.
"I suppose I was still treating her like a child. The Dh100 a week was not enough because she would save for a week or a month and then spend the whole lot. She had no idea about long-term savings projects such as buying her first car or university - they were just the never-never aspects of life - and on Dh100 a week, she couldn't save for those anyway."
Mrs Smith has now doubled Jessica's weekly allowance to Dh200 and opened a savings account for her in Australia, in which they deposit half of her pocket money.
"Now that she's got more money, she's actually become more frugal. When we went shopping before, she would pick up the most expensive shampoo whereas now it comes down to her, the generic supermarket brand is fine."
But no matter what method parents use to teach their children about money management, it does not guarantee the message will get through.
"There are many adults in this world who struggle to manage their finances, so the issue is only compounded for students," says Mr Shams, an Emirati who moved to the UK on his own when he was 16 to complete his A levels and later attended the University of Kent in Canterbury.
Mr Shams believes children of his generation were encouraged to grow up faster and face their financial responsibilities earlier on.
"As someone who grew up in Dubai during the pre-oil era, I started a summer job at 11 working as a petrol-pump attendant and when I went to university, I lived within the scholarship allowance provided by the Dubai Government. I would never have dreamt of asking my father for more money because I had too much respect for him. While the scholarship was my bread and butter, the income I earned working in Dubai during the summer months was the jam that funded my lifestyle."
However, Mr Shams says the financial discipline he learnt early on has not transferred to his daughter Yara, 22, who recently graduated with a degree in criminology and sociology from City University in London.
Before she began her degree, Mr Shams researched exactly how much his daughter's public transport, rent, books, mobile phone, internet connection and basic groceries would cost in London.
"Parents need to find out how much things cost, then you sit down with your child and come to an agreement. I decided that £500 (Dh2,880) a month on top of rent would be enough, but every two months I received a call saying there was a shortfall. That conversation was important because it helped to set the parameters and teach us how to get it right.
"Any parent questioning why there is a shortfall will not be told everything by their child, particularly when it comes to the lifestyle choices they make such as the £200-a-month smoking habit or the clubbing nights out every month.
"And as parents, all we have is our own experience and it would be unfair to expect our children to manage their money the same way we did. The costs students face today are very different to those we faced 30 years ago - imagine a student today without a mobile phone or the internet."
Daniel Britton is the author of The Financial Fairy Tales, a series of books that explore money principles through fun and entertaining stories for children. Here are his tips on how to manage money for parents and students
• Create a savings habit early in life
• Set an example by saving in a jar or money box
• Don't speak in negative terms about money or wealthy people because it can create a negative association
• Share the process of paying bills with your children
• Take them to visit a bank
• Open a child savings account as soon as they are ready, either at your local branch or an online account that the parents can manage
• Give them responsibility for managing their own allowance
• Allow them to fail - better to learn the consequences of overspending as a child than as an adult
• Encourage them to earn extra money from a job or enterprise
• Keep your own financial papers in order. This shows children that money is to be respected, but not feared
• Work out your budget and stick to it
• Make sure your priority payments - accommodation, food, rent - are met first and automate them via direct debit or standing order if possible
• Don't buy new books - look for used options locally and online
• Don't be influenced by the spending habits of others
• Be an early bird in the job search - get in ahead of the competition
• Shop around for good bank account deals
• Running a car is a major financial drain - think hard whether you really need one
• Use cash where possible. It makes spending more physical and real
• Remember the importance of insurance for your personal belongings
• Take a long-term view of your finances, not just week by week or month by month
Children's banking options
HSBC Premier account (from birth)
• Minimum monthly salary (parent): Dh50,000
• ATM card (14+ years)
• Emergency encashments
• Credit card
• Multi-trip global travel insurance
• Premier relationship manager for the family
Abu Dhabi Islamic Bank Banoon Children's Saving Account (from birth)
• Minimum opening balance: Dh5,000
• Minimum monthly balance: Dh3,000
• Monthly fall-below fee: Dh25
• Prepaid Darhoom Card
• Free Takaful cash cover protection (maximum Dh500)
• Automatic loading from your account to your child's card
National Bank of Abu Dhabi Student Account (18-24 years)
• Minimum opening balance: Dh250
• No minimum balance
• No monthly charges
• One free chequebook
• MasterCard debit card
Emirates NBD Youth Package (18-25 years)
• Minimum opening balance: nil
• No minimum balance
• No monthly charges
• Youth debit card
Mashreq Student Banking Solutions
• Minimum opening balance: nil
• No minimum balance
• No monthly charges
• Visa debit card
• Automatic load from parent's Mashreq account
National Bonds (from 12 months of age)
• Minimum purchase: Dh100 (each bond costs Dh10)
• Annual profit (2010): 3.78%
• No transaction fees
• Each bond holder automatically receives Takaful (insurance) coverage up to Dh125,000
• Customers are entered into 22,250 prize draws every month
• There is a Dh1 million prize draw on the last Saturday of every month