The 5 most important money lessons you need to teach your children

The 5 most important money lessons you need to teach your children

There is so much going on for Singaporean children - tuition classes, enrichment classes like swimming, piano, speech & drama, art, dance… the list is endless. Besides trying to unleash your child's full academic potential and discovering the genius in him/her, is there something important we are missing? How about your child's mindset, habits and knowledge about money? Is it ever too young to start learning such an important life skill?

Apparently not - habits are best cultivated from a tender age. If you wish for them to be financially independent in their adult lives, stay clear from debt, be able to afford a roof over their heads, and even contribute towards your retirement, this is one skillset which parents would do good to build in their children early in life. According to Warren Buffet, 'Teaching kids sound financial habits at an early age gives all kids the opportunity to be successful when they are an adult'.

So, what do you teach them and where do you start?

1. An appreciation for the value of money

Things are only valuable when they are limited in supply. Think tanzanite gemstones, rare paintings, limited edition sports cars, watches, one-of-a-kind antiques or Princess Diana's wedding gown.

As much as you want to provide the best for your children, they should not grow up with the idea that money is easily gotten or inexhaustible. Do not spoil them by giving them extra when they have run out of their pocket money by mid-week or buy everything they want to make up for your lack of time spent with them.

In this day and age, where some kids think that chicken originates from NTUC, it will do them good to realise that money does not drop from the sky. Paying them a token sum for holiday jobs like car washing, or cleaning up the house will ingrain in them the lesson that money is earned, and hence should handled prudently, not squandered.

2. Managing pocket money

Teaching your children to manage within their means and save up for things that they want stands them in good stead early in life.

Encourage them to set aside a small amount of their pocket money as savings and reward them for being consistent in their saving habits. Dollar for dollar matching for their savings could be one way to incentivise them to save from a young age.

You could open a bank account for them and bring them to deposit their savings every month. Challenge them to set savings goals and make it fun for them. After all, children enjoy exposure into the world of adults, and the idea of managing finances probably seems very adult to them. And hence, very cool.

3. Delayed gratification

Beyond dollars and cents, teaching your children about finances is actually teaching them values which will help set them up for success in their lives.

Remember the famous Stanford marshmallow experiment? Children who resisted the offer of a marshmallow for 2 marshmallows later on were more likely to succeed in life. Impulse control and discipline are certainly good traits to inculcate in your children.

Some ways to achieve this would be modeling this virtue for them, a visible chart that tracks their savings targets (complete with shiny stickers), and tangible rewards at the end of the month/quarter/year for meeting their savings goals.

4. Real life inspiration

Nothing beats real life stories. Inspire them with teenage examples like Cameron Johnson, who began making money at the age of 9 by selling invitation cards and earning 6-figure sums monthly by the age of 15. Inspiration is able to achieve what no amount of nagging can.

Negative examples of people who go broke after winning the lottery or squandered $1million in insurance payouts and public donations within a year drive home the point the importance of money management, whether one has little or much.

5. Not spoiling them with your fortunes

The sure recipe for your children to accomplish nothing in life is to give them all of your fortune. Why would they need to get out of bed everyday to go to work or put in effort to discover their calling in life when they have enough money to swim in for several lifetimes?

Even Bill Gates and Warren Buffet would rather give the bulk of their wealth away rather than to cripple their children from reaching their full potential.

These small steps could go a long way towards building sound financial values in your children. Your reward comes years later when your children start work and you have full confidence that they will be self-sufficient for life, able to stay clear from the allure of credit cards, and have enough stored away for a rainy day. These don't come with the wave of a wand, and they're not taught in tuition or enrichment classes.

This article first appeared in at is Singapore’s leading personal finance portal, and aims to help people maximise their money with powerful tools and engaging content.

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