If you are thinking primary school is the ideal age to start teaching your children about money, think again. Cambridge University research shows that children’s money habits are actually formed by age 7.
The study found that kids this age understand that money can be exchanged for goods. They are also capable of complex functions like “planning ahead, delaying a decision until later and understanding that some choices are irreversible”.
When I was 6 years old, I fuzzily remember trying to put my Chinese New Year and birthday hongbao money into my savings account. Today, my kids also seem to have inherited that habit of saving every penny they receive...until they chance upon a Lego set.
Then, they face the dilemma: “Spend my money now, or wait until there is sale — or just forget about it?” These are all legit options, but it’s tough to choose. Here are my suggestions on imparting good ﬁnancial lessons to your kids.
Ages 3 to 5
Money lessons now set the tone for later. Introduce the concept of delayed gratiﬁcation, where junior may have to save up in order to buy something he wants. So, if he wants to buy a toy, set a savings goal, such as a month. Ensure that it’s not something too expensive, or it may take him forever to save! Also, when he is queuing up for something, emphasise that it’s important to wait to get what he wants.
Ages 6 to 8
Kids this age should understand that money is ﬁnite, and if they spend it, it’s gone. So, they’ll have to learn how to make choices on what to spend on. Include them in ﬁnancial decisions — get your child to work within a budget by passing him $5 at the supermarket and letting him choose what fruits to buy. Consider giving him a small weekly allowance, then increase the list of things he now needs to use it for, such as buying a small toy.
Ages 9 to 11
By now, kids should know the value of money. Show junior how unit pricing works at the supermarket — a fantastic place to teach money lessons! Explain that the same products, such as milk, are sold under different brands and different prices. Get him to pick out the one that offers better value for money, or even better, ask him to spot the sale items! Discuss bulk deals, in which he can get more bang for the buck.
Ages 11 to 13
At this age, kids usually have a million things to buy, so make him work for his money. Now’s a good time to introduce the concept of compound interest as you want to shift his approach from saving for short-term goals to long-term ones. Give him a few jobs you might otherwise pay someone else to do, like washing the car or toilet, so the money he earns will hold far greater value for him. He’ll also be more reluctant to spend it!
Until they start earning a living themselves, children have a tendency to view — and spend — money like it grows on trees. Saving is an important value that’s best inculcated from young. The evergreen saying, “It’s never too early to start saving — a little a day, goes a long way”, still rings true.
Kelvin Ang, a financial planner, is dad to Alethea, 4, Ayden, 8, and Ashton, 10.
Photo: ING Images