When children are very young, it might seem unnecessary to teach them about financial matters. In fact, the majority of people don’t learn about saving, budgeting, banking, or investing money until they are young adults earning their first real paycheck. As a result, many are unprepared to make financially savvy decisions and often make major mistakes such as falling into debt or failing to budget for crucial expenses.
Muslims need to know how to handle money, including the Islamic rules about wealth and the practical, day-to-day skills that will enable us to support ourselves and our families. Waiting until adulthood to learn these strategies is extremely unwise. In fact, according to a study at the University of Cambridge, money habits are formed in early childhood and are basically set by age seven.[i]
So how can we teach our children to manage money responsibly from an early age so that they are prepared for the future?
1. Teach them the Islamic mindset.
First and foremost, our children should learn that wealth is a gift from Allah, but also a test. We will all be questioned on the Day of Judgement about how we spent our money. The Prophet (peace and blessings be upon him) said, "The two feet of the son of Adam will not move on the Day of Judgement in front of his Lord until he is asked about five things: about his life, and how he spent it? And about his youth, what did he consume it in? And about his money, how did he earn it? And what did he spend it on? And how much did he act upon what he knew?" (Tirmidhi)
It is also crucial for Muslims to understand that “. . . in Islam, Allah is the true Owner of all wealth, and the individual is merely a trustee or executor whose role is to use the wealth and assets in a manner pleasing to Allah,” according to an article about personal finance by Dr. Osman Umarji.[ii]
2. Instill a love of giving charity.
Sharing money with those in need is a fundamental principle of Islam, and we should model this to our children by letting them see us donate funds with a modest, kind, and generous attitude. Our kids should grow up with the expectation that part of their wealth will always be directed to charity. This will make paying zakat a natural part of their life. If children receive money for Eid, for instance, this is a teachable moment. Parents can help them calculate 2.5 percent of the total and encourage their child to donate that sum to a charitable cause. The Prophet said that “The wealth of a man will not diminish by charity.” (Tirmidhi). Our children should absorb the Islamic principle that sharing with those in need will purify their wealth and will, in fact, allow it to increase.
3. Encourage them to save and budget their money.
If a child receives a gift of $100, there are many options. She can either go to the store and spend it all on whatever strikes her fancy, or she can invest in her future. After setting aside 2.5% for charity ($2.50), her parents can help her save most of the remaining money by opening a checking account. If she adds regularly to this balance as she grows, she can amass a substantial sum which she can then invest, or use for important purchases like her first car. Children are often impulsive and want to spend money as soon as they get it. Adults can help them think long-term about their financial decisions.
4. When the time is right, introduce a debit card.
With a checking account established, a preteen is probably mature enough to start using a debit card. Using a debit card will help your child understand how to keep track of his money in the bank and will be safer and more convenient than carrying cash. Since a debit card requires the buyer to pay for the item immediately, in full, from their checking account, there is no chance of interest accruing. It is also impossible for the child to go into debt when paying with a debit card because he can’t spend more than he has. Make sure to opt out of overdraft coverage. If your child tries to make a purchase when he doesn’t have enough funds in his checking account, the transaction will simply be declined.
5. Show them how much everyday items cost.
If they have never gone to the store and purchased a gallon of milk or a jug of laundry detergent, children will have no idea how much everyday necessities cost. They are less likely to waste food and supplies if they clearly understand how much money everything requires. One solution is to allow your child to help with the week’s grocery shopping. Tell him how much money the family can spend, have him plan the week’s meals, and then let him do the grocery shopping as independently as he can. Seeing how much money it costs to stock a refrigerator, pack school lunches, and buy basic supplies will help prepare your child to run his own household. Similarly, show your child the monthly utility bills and let her help pay them. Explain how to write checks and balance a checkbook. Realizing how much electricity, phone lines, heat, and water cost will likely inspire kids to be more thoughtful about how much they consume. It will also prepare them for a future where those bills will be theirs to pay.
6. Model good financial decisions and let your child hear your thinking process.
“I like this new shirt, but I don’t really need it.” “That new car is tempting, but the monthly payment is more than we can comfortably afford.” “If we start saving now, we can take a family vacation in July.” “The new washer and dryer will cost around $1,000, so we need to save $100 per week for 10 weeks.” “I don’t always need the latest gadget. My old cell phone works just fine.” Children are listening to our conversations and watching our decisions. If we want them to behave in a fiscally responsible and ethical way, we need to live as role models.
With effort and mindfulness, we can inculcate in our children a conscientious and knowledgeable approach to money, inshaAllah. It’s never too early to start teaching our children about financial literacy and modeling appropriate behaviors.
Laura El Alam is a first-generation American Muslim and the founder of Sea Glass Writing & Editing www.seaglasswritingandediting.com. A prolific writer, Laura has published articles in numerous magazines and is currently writing a children's picture book for publishing company Ruqaya's Bookshelf, due to be released in 2023, inshaAllah. A wife and mother of five, Laura lives with her family in Massachusetts.