Recently, I had the pleasure of speaking with a bright-eyed, fresh-faced 16-year-old from River Valley High School.
“I can’t wait to go to uni!” she said. “You get to wear make-up at uni!”
Undeterred, I asked her what she wanted to study at uni.
“Whatever will make me rich,” she said with certainty.
Not sure if it was because of the type of personal finance education her parents had been providing her with or simply youthful ambition, but I couldn’t help but think that it’s dangerous when young people believe doing well at school and securing a high paying job will solve all their problems, financial or otherwise, in life.
Here are three things to teach your kids about personal finance instead of the typically Singaporean “study hard or you’ll become a road sweeper”.
There are always limits to how much you can spend as an adult
If you’re the sort of parent who buys your child everything she wants and are living in a flat that resembles the world of friggin’ Dora the Explorer, you’re not setting a good precedent. Children need to learn that money is a finite resource, even for adults.
Fail to teach them that and they are going to grow up dying to earn their first dollar just so they can spend it on all those wonderful things they wish they owned.
When your children beg for toys, if they’re old enough (7 or 8 should be old enough to get a sense of costs), use that as an opportunity to talk about prices of the items they want. Set limits on how much of your money they can spend.
It’s also best to avoid giving your kids so much allowance that they don’t need to budget at all. Give them just enough to comfortably get through the school week and they’ll be forced to save up for stuff they really want, which is an important lesson in delaying gratification and deciding whether something is really worth the money.
Make your money work for you and not the other way around
Many grown up Singaporeans seem to have some pretty warped ideas about how money should be used, it seems. Overspending is a huge reason Singaporeans chalk up credit card debt, and at the root of this unfortunate state of affairs is the mindset that you should work to earn money to buy the lifestyle you desire.
An attitude like that is very hard to correct, and many change their minds only when they hit rock bottom and have to downsize terribly to pay off their debts. Don’t let that happen to your kid.
Children need to know that money isn’t something you work for in order to buy all the toys in the world. They do need to know that you need to make your money work for, and that saving and investing provide security and enable them to be responsible for their own lives.
Teaching by example can work. Make sensible purchasing decisions and tell your kids why you’ve made those choices. Discuss your finances with your kids, and let them know that the money you put aside can keep your family safe even if something happens to you or you lose your job.
When your kids are a little older, discuss the consequences of going bankrupt or not being able to pay bills—for kids (and many adults, unfortunately), the notion of bankruptcy is a mere abstraction and they have no idea what it’s really like to be in financial trouble. Try to avoid scare tactics like the one about giving the kids away to the karang guni man—you want to teach your kids financial prudence, not turn them into paranoid basket cases.
Don’t immediately turn to money to solve the problems in your life
Singapore definitely doesn’t have a DIY culture, which is pretty sad. I have friends who toss clothes the moment a button comes off because they have no idea how to sew it back on, or who regularly pay people to paint their nails even if doing it themselves can save them $50.
Teach your children to have a DIY mentality by brainstorming as a family ways to do things without having to resort to paying someone for it.
The most obvious example would be having everyone in the house pitch in and help out with domestic chores rather than hiring a maid.
If you see a picture of a great meal on the menu of a restaurant you’re passing by, involve your kids in trying to recreate it at home.
Try to help them feel proud at the fact that they’re able to do things for themselves without having to resort to spending money to get others to do it. That’s an attitude that will ensure they don’t end up being one of those NS boys whose maids carry their bags for them.
What other money lessons do you think Singaporean parents should teach their kids? Share your suggestions in the comments!
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