Best Tips on Raising Financially Smart Children
As a parent, have you ever wondered how to educate your children to be financially smart at a young age, and grow up with better money management skills? Would you like to have your children better off with their financial management and understand that money had to be earned and many ways in earning it? Are you aware that these are skills that your children are not being taught in schools, and this is why financial education is an important knowledge to teach your children? Children are fast learners as they are curious in everything. You might be surprise, your children are actually learning about financial unconsciously on a daily basis, and most parents are unaware of it. So, start to be aware, you can teach your children financial education while playing with them, starts with things that are relatable to them like toys and games.
1. Money Make Things Move
Have you ever brought your children for a coin carousel ride, or children rides which you have to pay at the counter and they will assign you an animal ride with four wheels and allow you to drive your kid around the shopping mall for 30 mins? Unconsciously children learned that their favourite rides will only move after you drop in the coin or made payment at the counter. There will be a time when you found yourself out of coins and you have to tell your kid that, their carousel ride will not move. Children know it in their own ways, that money make things move, this is the beginning of their financial education.
2. Not Every Investment Will Gives Good Return
Have you ever asked yourself when is the best time to teach your children about investment, and will they even understand what investment means? Unknowingly your children might already know what investment means, in their own ways. Have you ever played claw machine, where you control the crane like claw and try to grad the prize (most often soft toys), and drop it into the hole where you can eventually retrieve the prize, with your children? While playing it, your children notice it will only work when you drop in the tokens or coins into the machine before you are able to play. And here is the financial education your children will be learning. Not every time you drop in the tokens or coins into the machine and start playing it, you will guarantee to win a prize, it is an investment, sometime you win, some time you do not.
3. Show Them the Money!
Show them the money, the notes the coins and share with them that, money is require to “make things move”. And indicate to them the different number on the money and what it means, and which is of great value than the other. Also share with them what they can do with the money, and how much does their favourite carousel ride and claw machine games cost. This is to let them know the value of money on each activity in a relatable way.
4. Get Them a Piggy Bank, Teach Them to Save
Are you ready to provide your children with some “easy money” money which they do not have to earn from? But where do they put the money you gave them? In a piggy bank, where they are able to see them being accumulated. Teach them as the money grown, they are able to use a certain amount of it to buy the items they want in the future, on their birthday, children’s day, Christmas, new year and Chinese New Year. This will help them learn the value of money, that money can be exchange for goods and services. And also explain to them the pros and cons in using up all the money in their piggy bank at once. Teach them that saving takes time.
5. Earn the Money
There might be time when you children will want to grow their piggy bank money faster. Instead of giving them money, this is the best time to propose to them on earning the money. Explain to them you earn your income through working for it or that you manage your own business. Thus, with your earned income you are able to provide to the family by paying for the food, utility bills, their clothing, toys, etc. Propose to them that they can also start earning an allowance from you by doing simple household duties. Examples like folding clothes with you, pack their own room, sweep the floor, etc. This is to allow them to understand money don’t come free, and “easy money” do not grow their piggy bank at the rate they want. And everyone has to earn the money, either as a career or as a business owner. Teach and help them, they are able to start earning money by selling off their unwanted toys, or that extra rare Pokémon card at online classified site or to games shops.
6. Beyond the Money
Are you a stingy kid when you were young? I guess I might be, because I am so protective of my own toys thus, I don’t just share them with anyone else. Therefore inculcate (teach) your children the true values of money, that money is a tool which we made use of, and it not only enable them to purchase the toys they like, but also a tool that can contribute to the greater good of humanity. It all starts with you as parent, by looking at you contributing to charity, they will learn, and this will be the best time to explain to them what charity is about and how money can help even if it is a small amount. On other occasion, like visiting their grandparents on their birthday. Share with them as an adult what gift you are giving and you may ask them what gift they like to get for their grandparents, like an apple or an orange, teach them the joy of giving
7. Go Shopping with Them
Bring your children to shopping. In supermarket you can teach them how to read the price tags, and the different prices on the weekly household grocery. Here you are able to teach them how to compare prices and is expensive item means better quality product. Bring them for toy shopping, give them a budget and allow them to choose the toy they like. If the toy they like is a little over their given budget you may ask them if they want to top up with your own piggy bank money, this will teach them on money management.
8. Interest, Time and Future
If you had obtain children education saving plan for them, let them know, and explain to them that in the future when they are ready for university, the plan will pay out a lump sum for their tuition fees. And because wealth accumulation takes time, therefore you have to obtain their children education saving early for their future needs. Also share with them the concept on time and interest. Let them know that by having a children education saving plan, it is to save money and earn interest, and eventually receive a lump sum pay out for their education. Compare to pay money and pay interest (taking up education loan). By understanding the concept of time and interest, they will start to understand that their piggy bank does not provide interest, this will be a good time to introduce to them what bank account is. Share with your children once there are piggy bank had reached a certain amount of money, they can deposit into a bank account and earn a small amount of interest. Share with them the advantage an early start on their retirement planning will enable them to stop work earlier and retire earlier.
9. Leverage on Money
Share with your children about the life insurance and income protection insurance that you had obtained, for the family and how it works. The objective is to allow them to understand how insurance pan leverage on the small amount of premium you are paying for a much greater sum assured. Another way is to play games with them like Monopoly where they are able to leverage with their game money to buy properties and build houses and hotels.
10. Ask Them to Pay
The best way to inculcate financial confident to your children is to have them make payment at the cashier. Whether it is a fast food restaurant, supermarket or toys shop, allow your children to know the price of the item and give them the money and ask them how much change should they be receiving back. Go through with them the buying process, follow them to the cashier and have them make the purchase and return with the item and the change. The objectives is to allow them to understand the buying process, how money is use as a tool in exchange for the item they want.
One Last Thing
There are many ways to educate your children on financial and money management, but most importantly, children will learn most from their parents’ money concept, how their parents deal with money and their financial. Thus I created Best Top 10 Financial Tips in Year 2019 some useful tips for your financial planning, before year end, and help you on your money management for the coming new year. And another 16 Financial Tips for your reference, hope it will help you in managing your financial seamlessly.
Note: Opinions expressed are solely in Mr. Chan Kong Meng’s personal capacity and neither express the views or opinions of Prudential nor represent any professional advice in Mr. Chan Kong Meng’s capacity as a PACS representative.