Financial awareness is arguably one of the most important aspects that your kids won’t be studying in schools. As a result, this is a course that parents need to handle and guide kids from the beginning.
It’s never too early to teach kids to make sound financial decisions. This will help them understand how to smartly and responsibly handle money for financial success as adults. And as kids learn from those around them, says Scott Mitchell, Senior Vice President of IPAC financial planning Singapore, your money behaviour will make a huge impact. Be a great role model and do as you want your kids to do.
Here are some of the valuable tips for raising money smart kids:
- Start a Piggy Bank:
Encourage kids to put aside a set amount of money each week. Specify that savings should not merely be money that is left over from their allowance. In fact, it is the amount first taken out of the income.
Discuss different creative ways of earning money and encourage kids to be entrepreneurial. To start, it could be a small cookie stall at a roadside gala or lemonade cart in a charity show. Some of the experiments may fail, but it is worth trying as this will lead them to experiment with new ideas rather than being demanding all the time.
Discussthe Value of Things
Try to take along kids on your grocery shopping trips. Ask them to help you decide which items give the most value for money, the best ice cream, a chocolate bar or the best detergent deal etc. This will help kids to start thinking about quality versus price.
Talk about the bad financial decisions you’ve made in the past – that credit card bill you couldn’t pay off or the expensive pair of shoes you only wore once. Let your kid learn from your mistakes.
- Give monthly allowances
An allowance is an effective way of teaching kids how to prioritise and make better spending decisions. Give a reasonable amount – not too much, not too little.
Once monthly allowance is given, let kids make their own moves and live with its consequences. Do not lend loan or they may become habitual of spending beyond means. Yes, they will probably get it wrong at the beginning but much safer in the long run.
- Set simple goals
Encourage kids to save for his/her extra treats. This will enable them to think, some things can’t be bought immediately. A goal chart certainly helps so that kids can see their goals getting closer each week, says Scott.
Practice the three jar system in front of them. Arrange three clear jars, labelled as ‘saving’, ‘spending’ and ‘giving’. Encourage them to put a small share from their savings to the ‘giving’ portion and tell them where the money goes. This will enable them to brush off the entitlement.
Help them determine the right split of the income; your kid will eventually learn discipline while taking financial decisions.
- Make it fun
Go on educational family outings and ask them to count the spent on tickets, snacks etc. Let kids pay for small things so they understand that it’s hard to let go of savings. Play monopoly and read stories that encourage good values that are critical for living a stable life like discipline and honesty in private and public dealing. Don’t bribe kids with money. You rob them of the satisfaction of achieving from self-motivation.
In short, raising money-savvy kids is critical, not just for their own future but for meaningful circulation of money for societal growth. You are your kid’s greatest influence and these financial skills are non-negotiable. The lifestyle has undoubtedly changed, with the heavier burden of increased debts, house prices and an uncertain retirement benefit in the future. What you do and teach every day counts! Today’s lesson, tomorrow becomes the passion.
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