Singaporean parents, if you want to ensure your kid has a bright financial future, flooding him with tuition and enrichment classes isn’t going to get him there, especially not if you spend so much to the detriment of your own retirement that your kids are forced to support financially you when you’re old.
Sorry to break it to you, but even if your kid aces the PSLE and O levels and eventually goes on to become that bank executive or accountant, if he or she has terrible money management skills, it’s possible he will be stuck on the hamster wheel forever, or put in a very bad position should retrenchment or a break from the workforce happen.
Here are ways to teach financial literacy to your kids and make sure they don’t squander all of your (and eventually their) hard-earned cash.
Give only as much pocket money as is necessary
Singaporeans tend to think throwing money at a problem is the best way to solve it. But the same doesn’t apply if you want your kids to grow up with a keen head for saving, budgeting and investing.
You see, if you give your kids ample pocket money and buy them every iPhone, PlayStation and kickscooter their little hearts desire, you’re going to turn them into the sort of person who craves designer bags and fast cars, and is fine with spending all their money to get them. They’ll only see what money can buy, but not how hard it is to earn it.
Still, your child does need some money to buy food in the canteen and for older kids who are no longer ferried around by school bus or the mom-mobile, transportation money.
Give your kid enough to keep him from dumpster diving in the school bins, but not so much that he’s hanging out at Starbucks every day. If there’s something he wants to buy, he’ll have to go without that extra curry puff and save up his pocket money to buy it.
This will only teach your kid how much effort and time is required to save up money, forcing him to evaluate whether he really really really wants that kendama. It also teaches him that if he wants something, he’s got to save for it, instead of having his desire instantly gratified. That’s something a lot of Singaporean adults need to learn, too.
Instead of buying toys directly, involve the kid in the buying process
While it is by and large a good idea to let your kid save up for what he wants once he gets to the age where he’s old enough to do so, unless you’re a complete monster you’ll probably find yourself buying some toys or gifts for your kids, especially when they’re younger.
But for every Bratz Doll or Angry Birds plush toy you buy your kids, you have an opportunity to unleash upon him a lesson about budgeting.
Instead of simply shelling out the money for the toy, take your kid to Toys R Us, Kiddy Palace or what have you and tell him you’re happy to provide a budget of, say, $50. Then let your kid decide (with your help) what to buy within that budget. He might choose to blow the entire $50 on a Nintendo 3DS game, use it to buy three Zootopia figurines, or save it so he can eventually buy a PlayStation 4.
Remember when you were a kid and you had no idea how much $10 was really worth in the grand scheme of things? Or found yourself wondering why your parents couldn’t just spend that $10,000 to buy you a pony?
When your child gets an idea of how much toys cost, he or she will become a lot more cost conscious, and also a lot more easy to reason with when you refuse a request because something’s just too expensive… such as he realises an iPad costs the equivalent of 50 Hot Wheels cars.
Start a small investment for your kid and track it together
Instead of sticking of all your kid’s ang bao money in a savings account and letting it get eroded to obscurity by the ravages of inflation, use some of this money as spare change to teach your kids about investing.
Now, unless you’ve got the type of relatives who dole out three figure ang baos, your kid probably isn’t swimming in tons of money. But that doesn’t mean you can’t teach him the value of compound interest with a simple low-risk investment.
You only need $500 to purchase Singapore Savings Bonds, which a year or two of ang bao money should cover. Get your kid involved and track the progress of the investment every year, explaining to him the concept of compound interest so he can see how the longer he keeps the money there, the more it will grow.
Most kids have no idea there’s even a way to make money grow, so this discovery in itself can be quite an eye-opener. If you manage to get your kids excited about investing at an early age, you’re putting them way, way ahead not only of their peers but also many adults, since they’ve got the benefit of time to let that money grow.
And if there’s something every Singaporean parent likes, it’s to give their kids a head start.
What have you done to teach your kids how to manage money? Tell us in the comments!