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8 Steps to Raising Money-Smart Kids

Managing money is an important life skill you need to teach your kids. Our experts explain how to introduce the   basic concepts and build a foundation for financial responsibility.



Introduce your kids to money as soon as they start to display an interest in their surroundings. Make the process fun – show them a range of notes and coins, play money counting games with them, and get them interested in saving by letting them deposit coins into their own piggy bank. Tell them how a person earns or makes money, and explain what it means to save and spend. When you take them shopping, involve them in the transactions by asking them to hand the money to the cashier or calculate how much change you’ll be getting.



Encourage your kids to keep track of their expenditure by getting them a money diary and teaching them how to use it. This will help them learn to manage money more effectively – they’ll be able to see how and when they spend their allowance, and where they can cut back if they fall short of their savings goals.



Give them small, easy goals to save towards, such as a storybook or toy. As they get older, teach them how to save and budget for long-term goals, like shopping money for the next family holiday, an expensive gadget or an investment deposit. This goal setting and planning process allows kids to get a better idea of their dreams and desires. At the same time, it keeps them focused on the importance of putting money away for a specific purpose.



Take your children to the bank regularly and be present when they deposit their savings into their account. Knowing that Mum and Dad are supportive of their efforts gives them a sense of achievement and motivates them to keep saving. Allow older kids to keep their own passbook so they can keep track of their money more easily. Also involve your children in day-to-day household expenditure. For example, turn the weekly grocery shopping trip into an exciting affair, when they can help you compare prices, look out for discounts and select the best value items. This is a chance to teach your kids how to differentiate between a need and a want, and how to avoid wastage.



A good time to give kids pocket money is when they start primary school – by this age, most kids understand how and when to use money. Begin with a small daily allowance. As they show more confidence and independence in handling their pocket money, you can give them a larger amount at less frequent intervals. Giving them an allowance creates opportunities to teach them about spending, budgeting, saving and the consequences of losing their money. Establish clear guidelines: For instance, if they spend their entire allowance before the next is due, they won’t get extra to tide them over. Explore various ways to teach them about financial discipline, such as encouraging them to take a packed lunch to school rather than buy food from the canteen, or to make birthday gifts for friends and family, instead of buying them.



Every now and again, get your kids to review how far they’ve come with regard to their savings. Show very young ones how heavy their piggy bank has become. If they are older, look through their passbook with them to see how their savings have grown. If their money has earned interest, this is a great chance for you to explain the concept to them. When they understand how interest works, they’ll be encouraged to save more and often.



Once your kids show that they can manage money and save for short- and long term goals, consider giving them a debit card linked to their savings account. Teach them how the card works and explain that it can be used for local, international and online transactions. When you’re out together, ask them to use their card in front of you so you’re sure that they know how to do so. Explain what will happen if they use the card irresponsibly. Having a debit card teaches older kids how to stretch their money through cash rebates and cardholder benefits like dining or retail discounts.



Invest on your kids’ behalf when they’re little. When they’re older, use the investment to demonstrate how money “grows” over time and explain how this money will keep growing to fund a specific goal – for example, their tertiary education. Highlight to older kids the importance of a diversified portfolio. Tell them why putting all your money into one account may not yield the best results, and why some risk is essential to get a higher rate of returns. At the same time, help them understand the downsides of greed and uninformed investing.



Our experts:

Tok Geok Peng, senior vice-president, Consumer Deposits, DBS Bank

Jessica Yeo, head of product development and strategic marketing, Consumer Banking, RHB Bank Berhad Singapore



By Sasha Gonzales, Simply Her, September 2014

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