Money management skills for children – Part 2
By Carol Yip
Tuesday Dec 21, 2010
In part one of this topic, Carol Yip outlined the importance of instilling money management skills for children aged two to 12 years old. In this second instalment, Yip shares what parents should do for children aged 13 years old until when they enter university.
Secondary school − 13 to 15
By middle school, children know how money is earned and spent. They also probably understand how hard it is to earn money or how quickly it can disappear.
1. Encourage children to start babysitting or do odd jobs around the neighbourhood. This shows them how hard you have to work to earn money.
2. Make allowance payments bi-weekly instead of weekly. This teaches children to budget their money over a longer period of time.
3. Increase your expectations for what the allowance will cover and things that your children want to buy. Discuss with them about their material needs and wants − if they can delay gratifications, find cheaper substitutes or not buying at all.
4. Tie the allowance to a list of weekly chores around the house. Reduce the allowance if chores aren't completed or done appropriately.
5. Ask your children to observe how you negotiate and bargain for better prices (value for money) when you shop with your children in a wet market, at neighbourhood groceries shops, pasar malam (night market) or flea market. Shopping in supermarkets and departmental stores does not allow you to teach your children negotiation and bargaining skills which are required in the corporate and business world.
Secondary school − 16 to 18 and university
Teens and young adults know a lot about money. It is a time where they want their freedom but have yet to gain financial independence. This is the opportunity to fine-tune their money knowledge and teach them principles of cash flow management, budgeting and investments.
1. Encourage your teenage children to find a part-time job. This teaches children to keep to a work schedule and balance their studies, work and life.
2. Make sure that your children continue to put some earnings into their savings account for the future and emergencies. Teach your young adult teens the concept of EPF contribution, SOCSO and PAYE when they start their first job, and tell them that they have to pay for their insurance premium when they get their first pay check.
3. If you continue to provide allowance for your children, switch to once-a-month payouts.
4. Expand your young adults’ financial responsibilities to include gas, cell phone bills and/or house utility bills. Teach them the importance of contributing to the family’s expenses and pay for their own expenses as well. They can keep a record of their daily spending and account for the expense at the end of the month with their monthly allowance.
5. Let your teens draw up the plans for a birthday party or your next family trip, and tell them the budget for the event or trip.
6. Don't bail your teens out. Teens should experience the consequences of poor money management, if the effects aren't too dire.
7. Organise family financial meeting once a month where you are the chairperson. The objective is to introduce your young adult teens to the experience of financial review and budgeting, which is part of corporate life.
8. Get your young adults to prepare the grocery shopping list and keep track of the family’s grocery shopping bills and supplies. This allows your children to manage the grocery budget, be in touch with grocery prices and inflationary costs of important necessities.
9. If your young adult is interested in owning a car, introduce the idea of saving to buy it. It can be a second-hand car, and at least they know what it costs to maintain and repair a car.
10. Introduce your young adults to savings and investment vehicles like CDs, savings bonds and stocks. If you get annual reports from mutual-fund investments, review them with your children, and explain the concepts of risk and investment returns.
11. Bring your teens and young adults with you when you’re house hunting and seek financial advice from banks for loan applications. Let your children know of your financial commitments for the housing loan’s monthly repayments, including the loan amount and tenure period. Help them understand the financial obligations of buying a house and property investments. This will help set the tone of coaching them to save more money to invest in properties at a young age.
I hope that the above ideas and suggestions will help you teach your children to be financially savvy and develop healthy financial habits and attitudes at a young age. These healthy financial practices will lessen the chance of them making foolish financial mistakes in the future. You will have equipped your children by encouraging them to pursue their career and achieve their life’s aspirations with the necessary money skills. That is a strong defense against going into debt unnecessarily or making bad investments. It is also extremely satisfying to watch your children navigate finances and achieve their goals and dreams on their own.
You will soon become your children’s greatest role model and it would be a fantastic legacy to leave your children with as a proud parent!
If you have any ideas or feedback on this topic, share it with Carol Yip at email@example.com. If you have questions on money management and financial planning, e-mail firstname.lastname@example.org