Educating your kids on the value of money from an early age will help them to become savers not spenders.
According to financial experts and studies, by the age of seven, most children would already have grasped how money works — in Singapore, this is when they usually start handling their daily allowance at primary school.
In addition, their attitudes towards money should also be formed by this age. This means that if you want your kids to be prudent with money, you have to teach them its value as soon as they are able to count. Here are easy ways how we, as parents, can help our children kick-start their lifetime savings habit.
1. Teach wants versus needs — visually
Before handing junior any money, help them grasp the difference between needs and wants with the help of sorting cards. Each card should have a drawing of a need — such as basic daily meals —or a want — such as ice cream. Ask junior to sort the cards and discuss each decision together. You can also help reinforce this idea by playing games with your child using Monopoly money, fake bills and a fun shopping list to help illustrate the point that buying too many items in the “want” category might cause those in the “needs” category to go unmet, and why this is not good — the WiFi in the house might get cut if the bill is not paid on time for example, and he can’t watch his favourite cartoon online until it’s paid.
2. Help them understand the value of saving
One way to develop your child’s financial sense is through the careful use of the money he receives from his allowance or pocket money, or from his saved up
Some kids think a game console can be bought for two dollars. For them to grasp the logic of saving money and be able to evaluate if an item they want to buy is worth its price, they need to realise how much it costs — in a manner they understand. The next time junior wants a bigger purchase such as the latest video game, suggest that he uses the money he has saved from his daily allowance or pocket money. You can offer to help match the amount your child can use from his savings for this item. This helps your child take some responsibility for his wants. Also, teaching your child the value of money when young helps sets him up for good saving and spending habits when older.
3. Make budgeting easy
Once savings goals are created, parents can introduce the idea of budgeting to help their children spend their pocket money wisely. A good practice is to hand out pocket money in lower denominations, so it’s easier for junior to set aside a portion for various goals.
There’s no better way to teach a child how to save than to set an example. With the right endowment plan, you can prepare for your child’s future milestones including education, and give the budding saver something to really look forward to.