National financial literacy programme MoneySense and youth financial education centre MoneyTree Singapore give parents tips on teaching their children financial literacy.
•Give your children a weekly allowance, and teach them to save what they have. Even the very young can be taught how to save through the act of putting money into a piggy bank. Encourage them to save regularly and watch how the savings grow. You can start by giving $1 each week to your children when they turn six years old. Increase the amount progressively each year.
•Educate your children on the difference between needs and wants. Allow them to compare items and organise these under the two categories. Advise them that they should always spend their money on needs first.
•Take your children along when you go grocery shopping. Teach them how to compare prices to purchase the items that give the best value. You can let them practise by allowing them to choose their own birthday gift. Encourage older children to do research on the products that they want to buy and compare them.
•Do not give your children the wrong impression that the family is poor by saying "we can't afford this". This may worry them. Instead, tell them that the family is able to afford something, but chooses not to buy it. This teaches them the importance of good decision-making when spending.
•Before they enter primary school, help them to make a budget to control their spending. Teach them to start by listing all the things that they need to buy and how much each item costs. Ideally, children should be taught to set aside some money for savings, before spending on budgeted items. The amount of savings to set aside should be factored into the budget.
•Use coupons and discount cards to show your children how much you save with these. This also teaches them the concept of saving.
•Use cash to purchase items instead of credit and debit cards when you are with your children. Explain to them how credit and debit cards work and how they will have to pay more if payment to the credit and debit card companies is not made on time. This also teaches them the concept of interest.
•Take your children to the bank and expose them to the concepts of saving and interest. Educate them that placing their money in a savings account will protect it and even earn interest.
•Show how savings can lead to bigger benefits for them, for example, a new toy or an outing. Start with more achievable goals for younger children. For older children, you may want to set a higher amount for a longer period of time before they can use their savings, to teach them patience and delayed gratification.
You may also like to show them how small expenses can add up and how the money may have been better saved for something more useful or desirable.
•Give your children the opportunity to "earn" money. For instance, you can pay them allowances upon completion of chores. This will allow them to see the relationship between working and getting paid.
This article was first published on August 17, 2015.
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