As a parent, we are constantly equipping our kids with new knowledge and skills. From young, we teach them how to count, how to read, how to swim, and how to ride a bicycle, but one of the most important life skills that we often miss teaching is how to manage their money.
Research has shown that money habits start to form as early as age 7, so talks on financial management should already start before that. In Singapore, being 7 means that your child will be receiving his/her first pocket money as they begin primary school. So how should we approach that topic? That doesn’t mean you have to sit your 5-year-old down for an hour-long lecture on check and balance (it is impossible!) - but we would need to start somewhere for sure!
Here are 6 easy but important money tips to get your child started on their financial journey:
To start teaching about money management, we need to first start talking about where money comes from. Kids need to know that parents go to work to earn a source of income for the family.
In today’s world, where kids see money magically appear out of automated machines, or things bought on the internet with just a few clicks, it is even more important for us to let them know where money comes from and where it goes. Money is definitely not an infinite resource!
One good way to start talking to kids about money is by reading. Books like “One Cent, Two Cents, Old Cent, New Cent” by Dr. Seuss or “If You Made a Million” by David M. Schwartz are two good books for young children to learn the concept of money.
One of the hardest differentiation, even as an adult, is between what is a “want” and what is a “need”. This should be one of the first few financial topics to be discussed with kids.
One way is to sit down together and come up with a list of wants and needs as a family. Items under needs include basics, such as food, shelter, basic clothing, basic transportation, education and healthcare. Wants are the endless extras - from eating out in fancy restaurants, buying the latest toys and gadgets to driving the latest model family car.
This way, we not only involve the child in the family financial planning and at the same time, teach them that it is prudent to always spend on the needs first, before planning to spend on the wants.