#ASK THE EXPERT

How To Raise Your Kids To Be Money-Smart

They’re never too young to learn basic financial concepts.

By Sasha Gonzales      22 November 2022

Financial management is an essential life skill. As a parent, you have the power to influence your children’s lifelong relationship with money. Kids as young as three years old are aware of basic financial concepts, so this is a great age to start teaching them about how money is made and earned, how to budget and set savings goals, and how to spend responsibly. By the time they’re teenagers, they should have sufficient experience with money to learn about debt, investing and wealth creation. 

Being financially literate not only helps your children make better money decisions (and prevent them from making bad ones); it also instils in them useful life values and lays the foundation for them to cultivate smarter money habits and strive for a more financially secure future. 

Tin It Phong, a finance director who also volunteers at SAFRA and is currently Chairman of SAFRA’s Audit Committee, shares some tips for raising money-smart kids. 

Q: Why is it important for kids to be financially literate and responsible from a young age? 

It Phong: When children are taught about the value of money and how to spend, earn and save it, they grow up having a better relationship with money and understand what it means to become a financially responsible adult. Your child is never too young to learn about money and financial management. 

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Q: What part do parents have to play in teaching their kids to be financially responsible? 

It Phong: It might be easier to associate this topic with some of life’s core values, that is – gratitude and appreciation, diligence, and honesty, for instance. Teach your kids that money doesn’t come easily (gratitude and appreciation), to work hard to earn an income (diligence) and to not take money that isn’t theirs (honesty). When you explain it to them in these terms, you’re also teaching them these important life values.  

Share with your kids about charity too – here’s how you can encourage them to do good for the community.

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Q: With consumerism and impulse buying so prevalent in our culture, how would you explain “needs and wants” and delayed gratification to young children? 

It Phong: Teach them that our needs and wants change as our priorities change and as we get older. They should also understand that needs are essential, whereas wants are not.

I think it’s more important to teach them to ask “why” before they buy something. For example: “Why do I want this?” and “Why do I need it?”. You should teach them not to buy something unless they really need it and that something that is easily available can wait. Encouraging them to ponder over these questions will get them into the habit of making informed decisions before acting on their impulses.

It’s also useful to teach them how to budget and explain how impulse buying can affect their budget and savings goals. 

Q: How do we teach children of different age groups about money?

It Phong: If your kids are between three and six years old, teach them how to identify the different denominations of coins and notes and make sure they’re aware that the denominations all represent different values. 

Between seven to 10, they should familiarise themselves with the basic concepts of earning, spending and saving. Teach them how to spend and save their daily pocket money. 

If your kids are 11 to 14, explain to them how the family earns and spends money every month and how you create your household budget. They’re also old enough to understand the differences between assets and liabilities. 

Children aged 15 to 17 can start reading about other mediums of exchange, such as commodities, and financial concepts like insurance and investment planning.

Aside from financial literacy, here are more key skills you should equip your child with.

Q: What are some good ways for younger children to make extra money?  

It Phong: Parents should be able to decide this for their kids. That said, it’s amazing how some children make millions of dollars simply by reviewing or showcasing toys on social media.  

Q: How can children help their parents save money? 

It Phong: There are many ways kids can contribute to the household budget – they can start with simple things, like not wasting water, switching off the lights before leaving a room, not overcharging their devices, and not spending too much time in front of the TV.

Here are more ways to save electricity and slash your utility bills.

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