The young and cash reckless
When Shana Clucas's marketing business was affected by the financial crisis, the mother-of-one decided to rein in her personal spending. It wasn't just her own spending she needed to control, but also that of her 17-year-old daughter, Kayla. To tackle her understanding of money, Ms Clucas, from South Africa, sat Kayla down with her bank statement and explained why she could no longer buy everything she wanted.
"I let her see my salary and our living expenses - rent, food, petrol, school fees, entertainment - and then what was left after that and we talked about how we were going to manage that disposable income," says the marketing consultant who moved to the UAE in 2003. "Saying 'I don't have money' is like a parent saying 'do it because I said so'. The only way she could buy into why there was not as much money as before was to actually see it on the bank statement and understand what it cost me to keep her in her lifestyle."
Ms Clucas, who lives in Dubai, was right to be concerned about her daughter's understanding of the value of money. According to a survey released last month, wealthy UAE residents might never retire because they say they are financially responsible for their children who know little about money. The poll, carried out by Barclays Wealth, asked respondents whether they agreed with the statement, "I am financially responsible for my children", and 98 per cent of UAE residents said they agreed - the highest score worldwide.
Being responsible for your child's financial welfare is one thing, but shelling out cash on demand is another more worrying trend. "Parents who give their child everything are eventually doing them a disservice as it takes away the incentive to be self- reliant," says Daniel Britton, the author of The Financial Fairy Tales, a series of books that explore money principles through fun and entertaining stories for children.
And with the world still reeling from the damaging effects of the global crisis, financial literacy in children has never been more important. "One of the contributing factors to the financial crisis worldwide has been the lack of sufficient financial education," adds Mr Britton. "Ease of credit, for example, has led to an attitude shift where affording the monthly payment is more important than the total cost. More complex financial instruments and savings products require better education and understanding."
Ms Clucas, a single parent, admits that in the past she spoiled her daughter, only introducing measures - such as giving her a fixed monthly allowance of Dh1,600 and taking her grocery shopping to help her understand how much things cost - when her own cash flow was affected. "The recession has been a valuable lesson for Kayla and me. Before, I would have never bothered to sit down and explain to her what we spend money on in a month because money wasn't an issue," she says.
"You come home with 20 bags from Spinneys and the child has no perception of what you've spent - they don't know if it's Dh300 or Dh2,000. I think she was astounded by what things cost." What makes it harder for youngsters living in the UAE to truly appreciate the value of the money they spend is the fact they cannot earn it themselves. It is illegal for children under the age of 15 to work in the UAE and the part-time job culture is almost non-existent for older teens due to the legal documentation required to secure a position.
"Kids here don't really know the value of the money they receive," says Kyle Dawson, an economics teacher at Dubai's Jumeirah College. "If they spend Dh30 at the cinema, they don't realise the effort it takes to get Dh30 when you work. And because this is an affluent society where there is a lot of disposable income, for many of these students the numbers don't mean anything because they don't know the value of what it takes."
According to a survey by Visa, the leading payment solutions provider, 95 per cent of teachers polled want financial education to be a compulsory part of the curriculum in the UAE. And a staggering 73 per cent admitted that schools did not currently teach basic money skills as part of the syllabus. "Relying on parents to teach the basics is not enough," says Mr Dawson, who teaches the British curriculum. "While it features in the PSHCE [Personal Social Health and Citizenship Education] syllabus, where they learn about basic budgeting, it's only one aspect of a module, so the exposure would be minimal.
"But while there's a whole term's work dedicated to personal finance in the GCSE economics syllabus - something that was introduced last year - not everyone takes economics. So it comes down to the issue of whose job is it to teach children to be financially literate - is it the school's or the parents?" Lynne Finch, an award-winning author of The No-Cash Allowance, says equipping children with financial know-how is ultimately the parents' responsibility.
"Today's kids need to develop something I define as financial competency, being the ability to manage one's financial resources to pay bills on time, make reasoned use of credit when necessary [especially credit cards] and to plan for future expenditures," says Mrs Finch, whose book shows parents how to teach their children to be responsible for their own money by creating a home account from which they can deposit and withdraw money.
"Simply knowing about financial matters will not help our children learn to manage their own money. Literacy is knowledge. Competency is skill. Financial competency requires practice, something that cannot and does not happen in the classroom, simply because schools can't provide real money in the classroom. Only parents can do that." Ms Clucas, whose daughter is in the final year of her International Baccalaureate, disagrees.
"At home, you teach them the practical stuff, but the theory should come from school. I used to give Kayla her pocket money at the start of the month, but by the 17th she'd be broke, so she asked for it weekly because she felt she wasn't equipped to spread it evenly over a month. "But what happens when she goes to university and has to manage her own money? She hasn't been taught how to draw up a household budget or open a bank account, so she's going to learn the hard way. I can sit her down and try to explain what a financial crisis is, but she's a teenager and the short answer is always 'yes I know'. She's far more likely to listen to something serious from the teacher than me."
But Mrs Finch says we just need to let them get on with it. "Parents know that kids will make mistakes while learning to walk or ride a bicycle, yet they don't want their kids to make mistakes with money," she says. "Helping children learn about money management does not require financial expertise, but rather the willingness to give control and responsibility for money to the child." This philosophy has been adopted by Sean Wildey, an airline pilot and father of three who has created a spreadsheet to record the balance of his sons' allowances. Mr Wildey says the pocket money his children receive is dependent on their age. He gives his eldest son, Joshua, 13, Dh50 a week, middle son, Felix, 12, Dh30 a week and 10-year-old Henry Dh20 a week.
"For the younger two, I record it on a spreadsheet - something I introduced about three or four years ago," says Mr Wildey, who lives in Umm Suquiem, Dubai, with his wife, Kate, a teaching assistant. "I wanted them to understand the concept of a bank account; that money is put in on a regular basis and you can withdraw from that, but you have to monitor your balance. "My eldest Joshua has gone back to a cash system and he gets Dh50 a week to spend on bigger purchases and running his own phone. Part of that was to give him more spending power, but it does mean I can't control what he spends."
While Mr Wildey believes his children are still too young to start talking about diverse portfolios, he tries to instil a sense of reality. "One of my sons wants to be a marine biologist, but he also wants to drive a Lamborghini so I told him what he was likely to earn when he left university and asked him to calculate how many months it would take him to afford one." So when is a good time for parents to begin educating children about money and personal finance?
"As soon as they begin to show an interest," says Mr Britton, the author. "Very young children can hand over money in shops and count the change for example." While Mr Wildey first introduced pocket money to his children at the age of five, Mr Dawson, a father of two boys aged two-and-a-half and seven months, has a piggy bank ready to go. "My eldest is used to the idea that you give the person at the till the plastic card and that pays for things, so he has to learn that that plastic card comes from working," he says. "At some stage, we'll start to introduce the fact that if he helps out, he will receive dirhams in return and that when he has so many dirhams he can buy certain things."
Ultimately, you can offer children the best financial guidance in the world, but if they like to spend, then they'll simply go ahead and spend it. "My children all have very different attitudes to money," says Mr Wildey. "Henry is fascinated about money and likes to have a large bank balance. Felix, the middle one, is good at targeted saving, but my eldest, Joshua, will spend it on the first thing he can. They've all received the same education from me, but I predict the eldest will have the biggest financial problems when he first goes out there."