Commentary: The right time to teach your kids the ABCs of money management is now

I distinctly remember the first time I dealt with saving money as a kid.

My parents gave me a Stamps Savings Card from POSB. Each stamp cost S$0.50 and collecting 20 stamps in a month would get me an additional S$1, on top of the saved S$10.

The total value of the stamps and bonus dollar would directly be credited to my account at the end of the month, and it would get me what I really wanted — exciting treats of my choice, ranging from ice creams to a brand new toy. Yes, I was rather low-maintenance!

This exercise inculcated in me a habit of saving, which I religiously practise till this day. It has held me in good stead, ensuring security for rainy days, and I only have my parents to thank for that.

In an uncertain economic climate, I cannot stress enough the importance of teaching our young ones the importance of money. It has come to light in several recent surveys that many Singaporean youths and adults lack financial knowledge.

There is a strong relationship between nurturing financial literacy at an early age and lifelong prosperity. If children do not receive proper guidance and cultivate the wrong habits in their youth, they risk missing out on opportunities and making costly mistakes as adults, which may greatly impact their overall well-being and quality of life. 

It is never too early to start. Studies have shown that kids can retain information from as early as three years old. Up to the age of eight, kids are able to absorb information and learn very quickly.

From the tender moments of observing their parents’ spending habits to getting their very own pocket money and deciding what to do with it, children’s early experiences with money lay the foundation of their evolving relationship with it.

Let’s dive into some tips for helping kids to cultivate healthy financial habits:

1. GIVE THEM OWNERSHIP TO HANDLE THEIR MONEY THEIR WAY

Avoid micromanaging money for your kids. Give them a set allowance and let them decide what they want to do with it. Use positive reinforcement to encourage the right behaviour — for example, a yummy treat or movie night if they reach a certain amount of savings.

The savings could also be tied to a goal they want to achieve in the future e.g. buying a new video game. This will further incentivise them to meet their goal.

Parents could even go further to introduce some chores from which their children can earn extra allowance, such as cleaning their room or organising their books and toys. Through this, they will learn about both money and housework — definitely icing on the cake!

Have your kids plan how they would like to use their allowance in advance — for an allowance of S$10, for example, S$5 could be allocated for snacks, S$2 for ice cream and S$3 for savings. This will teach them the importance of budgeting and saving for a future return.

2. MAKE LEARNING ABOUT MONEY FUN

Nothing better than if they are having fun while learning a life skill, right? Parents could use pretend play for preschoolers to get them comfortable with handling money. This could be in the form of playing customer and cashier at a grocery store, getting your kids to calculate the bill for items.

As they grow older, games like Monopoly and The Game of Life are great for teaching kids to make smart financial decisions, budgeting and planning for the future.

3. ALLOW SCREEN TIME, BUT MAKE IT EDUCATIONAL

Today’s kids are inarguably digitally wired. Without much guidance, they know their way around smartphones and laptops. For many parents, keeping kids busy with screen time has become a much-needed respite for them to focus on other chores.

And although at times we wish we could replace screens with a ball of yarn or a good book, the shift presents a chance to introduce children to products that can cultivate healthy financial habits.

There are also several online games and mobile apps that impart similar skill sets, such as Money Magic. Envision a child budgeting their pocket money through an app, watching their digital piggy bank grow with every saved coin.

This tangible link between responsible saving and future rewards activates their developing brains' reward centres, teaching them to manage money in a sustainable way.

Rising living costs are threatening the financial stability of future generations. Given this, it is now more crucial than ever to equip our children with essential skills and tools to navigate complex financial waters.

Teaching kids the building blocks of money management will create financially savvy young Singaporeans, who will be able to pass on the same knowledge to the future generations so that they not only survive but thrive.

ABOUT THE AUTHOR:

Raymond Ng is the Chief Executive Officer of Revolut Singapore.