How to raise a financially confident kid

PHOTO: The Straits Times file

When we value ourselves and have a positive self-esteem, we naturally feel confident in our ability to achieve the bigger things in life. The same goes for children.

When kids have a positive self-image, it influences their attitude, energy level, and even their response to peer pressure. Unlike children with lower self-esteem who second guess their decisions, those with higher self-worth are more driven to try their best and achieve what they want, despite external setbacks.

Having confidence at a younger age also impacts your child's ability to approach problems more rationally. To nurture financial independence in your children, consider using these real-life ways to build your child's financial confidence.

Let kids make their own money choices

According to psychotherapist and author, Amy Morin, one mistake that parents commonly commit is to let their child escape responsibility. You may think that letting your little ones make their own decisions and manage their chores can weigh them down, but this can’t be further from the truth.

When children actively participate in age-appropriate responsibilities, they are more likely to develop real-life skills and a sense of accomplishment which can positively impact their self-esteem. For example, have a conversation about the importance of budgeting and saving.

Then, let your children spend and track their weekly allowance. Encourage them to make their own choices when it comes to saving versus spending. This can also help them understand the difference between wants and needs.

If your child accidentally runs over the budget and overspends on toys or candy, let help them learn how to reallocate their remaining funds more appropriately. This way, they are more likely to be careful spenders and act with financial responsibility later in life.

Open a savings account with your child

Parents always try to take the lead in transactional matters such as paying at the cashier or ordering food at the counter because they assume that their children are either too shy or incapable of doing this on their own.

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Unfortunately, that’s just the mindset that can impede your children from learning about money-management. Joseph Cilona, Ph.D., a clinical psychologist based in Manhattan, suggests that children need tangible interactions to make sense of money matters.

For example, allowing them to engage with frontliners like bank tellers while opening a bank account can foster deeper understanding of how to choose the best savings accounts with the highest interest. Letting your child accompany you to the bank can also help them see how an ATM works.

It's also an opportunity to talk about banking basics like how interest rates can impact their total savings in the years to come.

Using a table like the one below, discuss why DBS, Bank of China, and Maybank are more attractive choices based on the interest rates that they currently offer.

You can even calculate the amount of interest your child can make per year to help them decide which bank can offer higher returns.

Which is the best Savings Account in Singapore?

Bank Minimum Deposit Interest
DBS Multiplier Account None Up to 3.00 per cent per annum
OCBC 360 Account $1,000 Up to 2.38 per cent per annum
UOB One Account $1,000 Up to 2.75 per cent per annum
Bank of China SmartSaver $1,500 Up to 3.00 per cent per annum
Maybank Save Up Programme $500 Up to 3.00 per cent per annum
Standard Chartered BonusSaver Account None Up to 2.38 per cent per annum

If you have older kids, consider letting them meet with bankers to learn about which debit card is most appropriate for their lifestyle or to explore potential ways to invest money safely . This could also foster more curiosity and interest in money-management down the road.

Create opportunities for your children

PHOTO: Pexels

This concept is not about rewarding your children when they complete a chore because rewards are not likely to drive intrinsic motivations nor build character in the long run.

If you give your children the duty of scrubbing the toilet in exchange for $10, they might do it but once you stop paying, they are not likely to continue with the task.

That's because they associate the chore with a reward that requires no more than temporary compliance. This is not to suggest that your children should work for their allowance, quite the contrary, they are entitled to it as long as they are part of the family and contribute their share as a family member.

Once that is established, compensating your children for extra work that is over and above their line of duty will become more effective for honing their independence and money-management abilities.

Be careful about your choice of words

Children are like sponges. They soak up everything around them and the words that you utter as a passing remark can quickly translate into commands that impact their behaviours, thoughts, and emotions.

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As such, the next time you want to reject your child’s request for buying new toys, don’t say "It’s too expensive," as this may invoke feelings of guilt when wanting to purchase nice things.

Instead, try suggesting why he or she can’t have the toy because it is not a wise use of money or there are already plenty of similar toys at home.

In the same way, when your children misbehave, make a clear attempt to separate them from their behaviours – it is not that they are ‘bad’, it is their behaviour that is wrong.

By making this distinction, your child will understand that they are loved no matter what happens, and that their behaviour or approach towards spending may need to change.

Educate children about the pros and cons of social influence

PHOTO: Pexels

Your children are bombarded by countless social media messages every day and this can impact their values and choices. While there are plenty of good things about social media, there are also plenty of downfalls.

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A survey conducted by the Royal Society for Public Health has even revealed that Snapchat, Facebook, Twitter, and Instagram all led to increased feelings of depression, anxiety, poor body image, and loneliness.

When you actively participate in social media exploration with your children, you’re more likely to guide them into positive ways of using these platforms.

Start by showing your children the good side of social media such as how they can stay connected with friends and family, gain access to relevant news and information, and even enhance their creativity by sharing ideas, music, and art.

Go on to forewarn them about the downsides such as cyberbullying, fake news, and obsessive marketing that trick users into overbuying.

This article was first published in ValueChampion.