Sound money management habits can form a strong foundation for how children deal with other matters when they grow up. “As you teach children about money, they also begin to learn other important lessons such as decision making, priorities, responsibility and goal setting,” says Brian Goh, senior vice-president of ipac financial planning (Singapore). Here are some money lessons in daily activities:
When at the ATM or when using your credit card
To appreciate the value of money, kids need to know where it comes from. Explain that hard-earned money has to first be deposited into the bank before it comes out of the ATM, and that purchases made on credit cards have to be paid for, in full, at the end of the month.
When grocery shopping
This is the best time to teach them how to make sound buying decisions. Have them help you look for items on your grocery list, and compare prices among different items. If you choose one brand of milk over another because it’s on sale, explain the decision.
When giving them an allowance
Paying out allowances on schedule (like the first of every month) teaches children the value of honouring agreements. Help them put away a portion into savings even before they start spending it, and assist them in setting savings goals, like buying a new toy.
Spending indiscriminately sends out a dangerous signal that we can get whatever we want, when we want. Instead, teach your kids the difference between needs and wants. For instance, when checking out the latest Plasma TV, explain that while it might be nice to have a new TV, it’s not a necessity because the one at home is working just fine.
When planning a holiday
This is a great time to bring together concepts like budgeting, saving, price comparison, and balancing needs and wants. Money lessons are best absorbed when they are put to practical use, so do involve your kids in the decision-making processes of holiday planning – from picking a destination to scouting for deals.
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