As a parent, you want the best for your children in every aspect, including equipping them to be financially savvy. This starts with laying a solid foundation by teaching your children about money.
Money is central to transactions in life and affects our daily life. From where we live, what we eat, the clothes we wear, the car we drive, healthcare, education, having children, going on holidays, entertainment, household bills, insurance -- basically everything to live a decent life, requires money.
However, many parents do not teach their children sufficiently about financial literacy. Many children also wish that these financial matters were even taught in school because of a lack of education at home.
As parents, preparing our children to be able to survive well in the world is the best gift that we can give them.
So how can you teach your children about finances? We break it down by age below.
At this age, when children are given the choice of a 10 cent coin versus a 50 cent coin, they’d likely choose 50 cents based purely on its size. While children at this age may not be able to understand the value of money, they can begin to start to learn the names of these coins.
Get them to do this by matching with images of the coins and associate the appropriate names with them. Play pretend with an imaginary shop where children exchange play money for goods. This helps them learn the basics of commerce.
At this age, you can start to pick out relevant discount coupons or promotions online and ask your child to help you pick out these items that you need at the store. Not only does your child feel like they’re helping with the grocery shopping, but it’s also a good way to start teaching them about the concept of saving money.
During playtime, you can also involve the use of play money and ask for some change.
Your child is likely to start primary school at this age and depending on your decision as parents, they may start receiving an allowance. With an allowance, you can begin to teach them the basics of saving. You can do so by opening a savings account for them, and get them to put in a percentage of their weekly allowance in their account.
You can also get them to choose a piggy bank that they like to be able to start saving their pocket money in. When this is full, you can deposit this into their bank account.
In this age range, you can get your child to compare the pricing of items. For example, bulk purchases usually cost less. You can also show them the difference between purchasing the same item in different brands and asking them if it’s worth the extra cost.
You can even go the extra step to try out both items so that your child is able to see the difference for themselves.
In their early teen years, your child can start to understand the simple basics of investing. Pretend to invest in companies that your child is already familiar with such as Disney or Apple, then read the news about these pretend stocks to see the stock values of everyone’s choices.
Additionally, you can help your child set a budget by discussing wants vs needs. For example, potatoes are an essential food needed to survive. The gravy that comes along makes it taste nicer but isn’t a necessity.
You can reinforce this by going over the family budget with your child and discussing the family’s wants and needs.
Age 16 and up
As children get older, and with the increasing use of cards as the mainstream payment method in this day and age, it’s important to teach them about these tools. You can provide your children with stored value cards, such as a prepaid debit card or and EZ link card that can double up as a Nets FlashPay card for payments.
By loading a set amount of money into these cards, children have to learn to budget their allowance. You can also teach your teen about donating to charity and their social responsibility actions at this age, too.
Practice what you preach
Most importantly, remember that leading by example is key. Your child has to see your good financial habits too, in order for them to truly understand the importance of managing money. Showing them good saving and spending habits is key.
Although this may take some time, don’t be discouraged. As long as you keep up with it and communicate your message clearly about money, you can instil good financial habits that will serve them well in the future.
However, as a parent, if you find yourself having some trouble managing your own finances, or saving for the future, don’t hesitate to contact us. We can connect you to people in the financial industry to help you build your own solid financial plan and future.