Having basic financial literacy for children is crucial as it helps them navigate through life as an adult. Not only will they be able to plan ahead for the future, they will also be aware of the importance of keeping their spending within limits and make wise spending decisions.
While it will be years before our children get to experience first-hand the complexities of managing their finances, there are lots we can do right now to teach them the concept of money and savings. From money games for children to lessons on counting money, here are some hands-on activities to start off with during your children’s early years:
5 Years Old and Below
Introducing coins and the piggy bank
During the early years, our children’s brain soaks up new concepts and information like a sponge and it is during this time that learning takes place at a rapid rate. As they learn best by observing others and repeating their actions, you can make the most of this by introducing the various coin denominations and putting money into a piggy bank. The more they practice this, the concepts of “money” and “saving” through the piggy bank will become second nature to them. However, do bear in mind to introduce this exercise once they are past the stage of putting things into their mouths.
Create “Saving”, “Spending” and “Sharing” jars
Here’s a great way to teach children how to count money, on top of introducing the concepts of saving, spending and sharing. Set aside three jars (or plastic containers) and label them as “Saving”, “Spending” and “Sharing”. Each time your child receives money – i.e. during his/her birthday or major celebrations such as Chinese New Year or Christmas – get him/her to place the money in the jars. The money in the spending jar can be used for simple treats such as sweets or stickers, while the sharing jar can be used to help someone in need or donated for a worthy cause. Lastly, the saving jar acts as the most basic lesson in saving – your child can accumulate the money in there for bigger purchases, such as his/her favourite toy.
Play “Supermarket” at home
A great money game is to set up your very own supermarket at home by preparing DIY grocery items (think, plastic fruits and vegetables, and empty sauce bottles) and giving each item a price tag. Arrange them neatly in rows and give your child a basket and paper notes to “shop” for groceries, while you play the role of the cashier. When their basket has been filled up, count the total amount and get your child to give you the correct notes and coins to “pay” for their purchases. For older children, you can take this to a higher level by giving them a shopping list and introducing discounts and offers on selected items.
6 to 10 Years Old
A lesson on allowances and savings
Most children receive allowances when they start primary school. At this age, they understand that money is used a means to exchange for goods (i.e. food or stationery items from the school book shop). To establish good spending habits, you need to set down some ground rules such as to inform you what they spend their money on. This is also a good opportunity to encourage them to save, instead of spending all the allowances. You can keep them motivated by offering to match the amount saved so that they can see their money “grow” over time.
Get them involved in real-life purchase decisions
You can now include your children when making real-life purchase decisions – starting with the weekly grocery trips. Start by setting aside a budget for a set of items (e.g. $10 for milk, eggs, bread and fruits). Here, you can carry out price comparisons with them by choosing items that are on offer while keeping to the set budget for the items required. Through this exercise, you are essentially teaching them simple budgeting skills that will definitely come in handy later.
Encourage them to give back
There are many ways to teach your children to give back at this age by sharing their blessings with others. This can take the form of donating a small amount of their savings to a worthy cause (i.e. there will be plenty of opportunities to meet people with donation cans on the streets) or clearing out their toy boxes every now and then to give away their toys to children from needy families. Through these exercises, you are also inculcating important life lessons to your children, such as the value of compassion and gratitude.
Discuss needs versus wants
While you are shopping with your child, you can include them in the process of making wise financial decisions by getting them to weigh the importance between a need and want. Here are some questions to get you started:
- Do we really need to buy these buns? Or can we skip it since we are going out for dinner soon?
- Is this bowl the best we can get, or would it cost less elsewhere?
11 to 13 Years Old
It’s never too early to start Financial Education
You have started a savings account for your children since they were little, so now’s a great time to introduce the more complex banking concepts of ATM, online banking and interest rates.
To show them that “digital money” will run out the more they spend, you can set up an excel sheet to record their spending and keep track of the amount saved. As for explaining to them about the abstract concept of interest rates, Beth Kobliner, author of the New York Times bestseller Get a Financial Life, recommends that we use specific numbers and simple terms such as, “If you set aside $100 every year at 14, you’d have $23,000 by the time you turn 65. But if you start saving at 35, you’ll only have $7,000 at 65”.
Introduce long term saving goals
By now, your children might be well versed with the concept of saving up for the things such as their favourite snacks and toys. You can take their saving efforts to the next level by getting them to set a longer-term goal for big ticket items and holding back on their regular purchases. For example, if your child has the habit of buying snacks and stationery from the school bookshop, he/she might want to hold back on those and save up for a watch instead. By setting long term goals, your child will learn about the concepts of delayed gratification, trade-offs and opportunity costs – which essentially involve giving up the things that they like in order to save money.