The global economy is tanking big-time ― employment rates declined in the first half of this year, while retrenchment rates have risen to its highest levels since 2009. Parents should seize the opportunity in these tough times to teach their kids the value of being financially prudent.
Children who learn valuable fiscal lessons at an early age will fare better in life, especially if the economy continues to be depressed. Swati Arya, head of content development at MoneyTree Singapore, which offers financial literacy courses for children, stresses that you kids should be aware that while “money is not everything, but everything has to do with money”.
Nor should you wait till your children are in their teens to teach them the importance of managing their finances. When youngsters get familiar with money matters early, they will see how small savings today can reap big benefits in the future. Says Swati, “Don’t pass the buck when teaching your kids about financial literacy ― catch them young and watch them grow their money!”
As parents, remember your child is going to mirror whatever you do. So, you’ll need to set a good example for your children be being disciplined in your spending. Swati suggests starting with simple things like informing them about making a deposit, showing them your bank balance, shopping wisely and saving up for big purchases, instead of buying on credit. Swati stresses, “You need to walk the talk if you want your kids to learn from you or take you seriously.” Take note of these pointers:
“You need to walk the talk if you want your kids to learn from you or take you seriously.”
1) Introduce them to money
Show your preschooler what a collection of notes or coins look like. Help him identify how much each note or coin is worth and point out the difference in colour, shapes, sizes and weight of each form of currency.
2) Teach them to count with money
Once he can count, try this activity: Give him a handful of coins and let him arrange it in order ― from smaller to larger amounts and vice-versa.
3) Play “shop”
At this age, your child learns best through make-believe. So, take turns playing “shop” with your tyke, so that he gets a taste of making decisions with his money. Stick to simple maths — if one banana costs 10 cents, then five bananas should cost 50 cents. Nor should you expect him to know that a dollar is made up of five 20 cent coins, and so on.
Read on to discover how to encourage your child to start saving…
Primary School Children
4) Get them to start saving
Swati suggests that you get your sweetie a small piggy bank to save money before he starts to handle pocket money. She stresses you should “teach him to “pay yourself first” (saving money first before spending it). You can also offer him small monetary rewards when he helps you with simple chores.
Local banks also offer savings accounts for kids without the usual administrative charges. For instance, coin processing and fall-below fees for an ePSOBkids Account will not kick in until junior turns 21. A great way to introduce him to how ATM works is to get him a bank book that he can update on a regular basis.
5) Control of pocket money and budgeting
Primary school marks the first time your kiddo will need to make independent financial decisions, so it’s a good opportunity for him to start budgeting. Don’t give him excessive amounts of pocket money ― he may start spending money without though, or worse, may become a potential target for pickpockets! A $3 amount should be sufficient to buy a meal and a drink during recess. Double this amount if he has to stay back for remedial classes or co-curricular activities.
6) Take them shopping
The next time you’re shopping for groceries, bring junior along. Involve him in making decisions by comparing different brands and prices, then encourage him to load the trolley with the best deal.
Take the self-checkout lane ― he’ll learn how to put the items into appropriate bags. Also, get him to feed the money into the machine, as well as count the change together. This should show him that he should always check his change.
Once he realises that the iPad costs 10 times as much as his Lego set, he will see it in a different light.
7) Teach him about scale and ratio
Don’t present him with gifts of toys, bring him to buy toys, instead. While you are shopping, Swati suggests that you explain the differences between various toys and gadgets. She suggests, “For instance, if junior has been pressing you to get the latest tablet, explain its cost to him in term of other toys.” Once he realises that the iPad costs 10 times as much as his Lego set, he will see it in a different light.
8) Get them involved in charity work
Volunteer at a local charity as a family, so that he looks beyond focussing on his own wants and needs to the needs of others. When he sees others who are in greater need than he is, he’s more likely to be content with what he has.
Secondary school and beyond
9) Understanding debit cards
No doubt about it, your youngster’s financial judgment might be tested as he is part of generation that’s both web-savvy and consumer conscious. He should also be getting his first debit card during his time in secondary school. Before your child gets these cards, make sure he understands the risks of owning one:
*He should keep the card securely, and know what to do if it goes missing.
*Be familiar with which online retailers to trust and which not to, so as to avoid falling victim to scams and bogus purchases, or worse, hacking.
*He’ll need to keep track of his spending, especially since it’s too easy to lose control when buying items online with a card.
*Unlike credit cards, debit cards don’t come with credit limits ― so, a deduction is made to his bank balance with every purchase.
10) Invest with them not for them
Instead of just focusing on short-term financial goals like saving up for a toy or gadget, it’s time for junior to think long term — saving for higher education or even his future home. You might also want to introduce him to the concept of endowment plans. Or can bring him to the bank to explore investment options with him. Swati says, “Explain how things like interest work to him. It can help him get a different view of money and how it grows.”
Swati Arya is head of content development at MoneyTree Singapore, which offers financial literacy courses to children aged 6 to 17.