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What does success mean to you? To some parents, it means straight As in school; to others, it means living a happy, peaceful life. But no matter where you fall on that spectrum, there’s no denying that being financially comfortable makes it a whole lot easier.
And like most life skills, starting early is key. Teaching your kids how to be financially responsible when they’re still young means you help them create good money habits before bad ones take root. Good money habits are another way you can help instil good values in your children – you can extrapolate lessons taught about financial responsibility into general lessons about personal responsibility. After all, what better way to show them that all actions have consequences?
What’s more, boosting their financial literacy will also help them work on basic logic and maths skills as well, so it’s a win-win result!
Make it real
The best way to drive home any lessons you want to teach about money is by making it as real and relevant to your child as possible. Give your children plenty of hands-on experience with money, in an age-appropriate way. Toddlers and pre-schoolers can learn to count, group and sort coins; older children can help you figure out how much change is due, or how to budget for a trip to the market.
Once your kids are comfortable with the concept of money and counting, it’s time to introduce the concept of savings. While it’s definitely very prudent to save most of your kids’ hongbao gifts, don’t stop there. Encourage your children to set aside part of their regular weekly pocket money – in our house, we encourage our children to save 10% for charity, 10% for a big-ticket item and 10% into a piggy bank for spending on gifts for others.
Another way you can help make the concept of saving more “real” for your kids is by making sure that they get to reap the rewards of making prudent financial decisions. If you think about it, it’s the same way big multi-national companies incentivise their CEOs by linking their overall compensation to the company’s performance.
We do this by encouraging our children to find ways to “stretch” the household budget, and by contributing part of the money saved to their savings accounts. For example, if a child decides to save by cutting his own hair (an easy $15 savings each month for the cost of a pair of clippers), we would put $5 into his savings account as a bonus for being money smart.
Teach your children how to wait
The biggest predictor of financial success later in life, researchers have found, is linked to a child’s ability to delay gratification. So, helping your children to learn how to wait is the best thing you can do to teach him the patience to save and to make better decisions.
Experts suggest working with your children to develop a wish list of items that they want to buy, and only allowing them to purchase them if those items remained on the wish list one month later. This technique not only discourages impulse buys (which are the bane of every sensible budget), it also shows your child how to manage the emotions of both wanting something, but also learning to wait for it.
If you would like to learn more about teaching your kids how to be financially responsible, check out the e-book Bringing Up Money Smart Kids by bestselling authors Adam Khoo and Keon Chee.