Last Updated on March 4, 2022 by Parentology
There is a lot that goes into raising children here in Singapore, especially when it comes down to their education. Not only do we have to worry about helping our kids succeed in class and get good scores but we have to consider their enrichment classes as well. As parents, we have so much on our plates just trying to get our children through school, that it can be easy to overlook crucial life lessons such as helping our kids cultivate a good mindset towards money.
Teaching our kids about managing money and developing financial prudence may seem like something that is preferably taught when they are older. However, these are skills that are better learned at an earlier age. Children who gain financial literacy at a young age, are given a huge head start compared to kids who were not.
Here are a few important financial management lessons that you can teach your kids today:
Delayed gratification is one of the most important lessons that we can teach our children at an early age. However, as parents this is a lesson that is easier said than done. It can be excruciatingly difficult to resist our kids when they want something but if we always give in, this will only spoil them.
We need to be careful when we decide to give in and know when to say no. We have to teach our kids that it is better to wait. So how can we teach this lesson?
1. Giving a Budget
A good option you can try is to give your kid a small budget of around $20. They can spend this right away and buy a toy or they can save it, so they can afford something better later on. This will not only help teach your children the value of money but it will show them the virtues of delayed gratification.
You can give your kid a small allowance every week. However, to make sure that you are teaching your children how to be financially disciplined, you could make a monthly chart. Show them the things they could purchase if they decide to wait. For example, if they wait two weeks, they could buy this or if they wait three weeks, they could get this. It makes their progress tangible and makes the awards of saving clear.
3. The Value of Money
It is only natural to want the best things for our kids. However, it is important to have a limit. If we give our children too many things, they will assume that money is easy to find and that they can get whatever they want.
If your kids run out of their weekly allowance on the first day, do not give them more. Or if your children ask you for something every time you go to the mall, do not give in. Use these situations as teaching opportunities. For example, if your kid runs out of their allowance, give them the opportunity to earn more money through chores. This will help them understand that money does not grow on trees and that it needs to be earned through hard work.
Budgeting, Investing, and Saving
It is never too early to teach your kids about investing, budgeting, and saving their money. You can even take it a step further and explain how inflation works by telling them how much things used to cost when you were a kid, compared to now.
You can even help your child get into the habit of saving by getting them a piggy bank or a savings account if they are older. That way they have a place to put their extra money and watch it grow over time. This will help get your kids into the habit of saving, instead of spending every single cent they have.
Give Actual Examples
Telling your kids that saving their money will help them afford expensive things later on, usually doesn’t stick. It will just go through one ear and then out the other. However, if you use real life examples from actual kids and teenagers, they may actually listen. There are numerous examples of kids saving up their money and getting their own house before they even turn 20.
It is also important to use examples of people who wasted all of their money because they do not know the value of it. Such as individuals who have won the lottery and gone broke a year later.
Educating Them on How to Handle Their Own Money
When it comes down to financial literacy, educating our kids on how to handle their own money is crucial. Whether they are old enough to work at a part-time job or if you are giving them a weekly allowance, they need to know how to save and budget. There are a plethora of options you can try such as:
1. Encouraging Them to Save
Just because you have the money to afford something, it does not mean you need to buy it right away. Teach your kids how to decide whether they need something or not and how to put away their extra money for a rainy day. You can even entice them by teaching them how interest works by matching their savings dollar for dollar.
2. Teaching About Shortfalls
If your child spent all of their money in a single day, giving them more financially will not teach about shortfalls. Instead, to educate on budgeting and the limits of spending, teaching about the consequences of shortfall like having to live for the time being without any funds because they did not save or budget it, can be rewarding.
As parents we would want to shower our children with whatever they want when they are young. However that may be a recipe for disaster. Doing that will instill the mindset that things will be freely handed to them and thus they’ll be robbed of reaching their full potential. Teaching your kids how to be financially literate is crucial. These life skills will help your children find success when they grow up because they know the value of money and how hard it is to make.
What are some of the ways you use to educate your child on the importance of financial management?