Common cents

MONEY makes the world go round, though many of us are yet to master the skill of managing money efficiently. Therefore, it is never too early to start educating young ones on the importance of being wise with the ringgit, with experts agreeing that children should be taught money matters while they are still in preschool.

Children can do simple mathematics even before they become aware of monetary concepts. They will know that there is always money paid in exchange for goods or services. The key thing to do is to let them know that while money is exchanged for goods, it is not infinite and therefore they need to know how to manage it.

Budgeting and saving

One of the more important aspects of financial literacy is knowing how to budget. Most people who do not budget end up with unpaid bills and more often than not find that the decimal place on their bank statement has moved forward a point.

The first thing you should do as a parent is be a good role model. When a child watches her parent do something, it automatically registers as the right thing to do. So if you want your child to save in a piggy bank, you should, too. According to Michael Reyes, CEO of Moneytree Asia Pacific, when children receive their allowance they should decide how much to save first instead of how much to spend.

Slip money into a piggy bank or a jar after making sure that your child is watching, or if your child is slightly older, sit down to show and explain to her how you budget for the month ahead.

Show your child how much you allocate sufficient funds for each type of expenditure so that she gets a rough idea of how to prioritise spending. Also, compare prices while out shopping for groceries and ask for your child’s opinion on which products are most worth buying. This encourages critical thinking in children, which is a very important quality to have when growing up.

Be sure to also allocate money for savings as children are at the most impressionable stage of their lives when they are in their pre-teens. A parent could also introduce an incentivebased savings system by offering rewards for different amounts of savings achieved. This gives a child the drive to save more money to reach their goal faster.

Boundaries

As a parent, limits should be established so the child knows what exactly she can expect from you. When a child asks for something, first determine if it is a need or want, because fulfilling all her needs is your responsibility but fulfilling all her wants is not.

By fulfilling all the child’s wants, you are giving her something that will not be always available to her, which is not exactly the best thing you can give your child. That being said, not all the child’s wants should be rejected.

Decide if the child deserves what she is asking for, and if she deserves it by all means give her what she wants.

Another behaviour that has recently become disturbingly common especially in Millennial Generation or Generation Y children is impulse buying. You should never accommodate a child’s impulsive wants nor should you be impulsive yourself, at least not in front of a child. Impulse buying is a main contributing factor to depleting your bank balance and piling on more debt.

Money management

There are various interesting ways to teach older teenage children to be independent and manage money wisely. One way to do it is to sit the child down and discuss (maybe negotiate too) all the expenses that will be incurred by the child for the duration of one month. Expenses may include clothes, food, drinks, leisure activities and petrol, among many others.

Once an amount is agreed upon, make it a point to deposit that amount into the child’s bank account at the beginning of every month.

This is where it can get a bit tricky. For the first couple of months at least, with all that money available to them at once, a child will most probably overspend and end up with no money at the end of the month or even sooner.

This is where you as the parent can make them take responsibility for their actions and let them learn from their mistakes. After one or two months, the child will get used to it and will start budgeting more wisely.

Earning money

It is inevitable that your child will eventually ask for a raise in her monthly allowance. Instead of just agreeing with your child or saying no, you may suggest alternative ways of making money.

There are more ways for children and young adults to make money these days than there were 10 years ago and they should make use of the opportunities available.

Teens can earn extra money tutoring other children.

Alternatively, they could recycle old newspapers and make a tidy profit out of it.

Some parents make deals with their children to do extra chores in exchange for monetary compensation while others encourage their kids to organise garage sales to sell off old, unwanted things. This is good practice as it encourages kids to develop an entrepreneurial spirit.

It is imperative that parents teach children to be financially literate at as young an age as possible. Though it may be a little tough at first, it’s the best gift you can give your children.