A Comprehensive Guide to Raising Financially Smart Children

10 Jul 2018 
SOURCE: Bank Bazaar.sg

With all the different things a Singaporean child ‘needs’ to learn these days, it’s easy to procrastinate when it comes to teaching our children about money. It is, after all, not going to help them to excel in school or impress other parents at a school performance.


Yet make no mistake, teaching your child about managing money well is one of the most important things to learn. The sooner your child grasps the concepts, the sooner the knowledge will pay off.

It’s never too late to learn how to be smart with your money. At each stage in life, there are different lessons you can teach your child about money. And because we know it’s not easy to do so, we have created a guide to help you.

Teaching a child about money doesn’t mean he’s going to be stingy or ‘money-faced’

What to teach your preschooler

1. Introduce them to money
Get your child interested in money by showing them notes and coins. Get them interested by asking them questions such as what colour is the note? What’s the number on the note? Compare two notes and ask them which number is greater in value.

2. Play simple counting games
Give your child a bunch of coins and ask them to arrange it from the largest number to the smallest number and vice versa. Buy your child a piggy bank and ask them to put in one coin every day. At the end of the week, sit with your child and count the number of coins you have. The following week, ask your child to take one coin out of the piggy bank every alternate day and give it back to you. At the end of the week ask your child to count the number of coins left.

This is an extremely simple way of teaching them the concept of saving and having to pay for expenses, without using those terms. In fact, this is a great way to even introduce the concepts of addition and subtraction to your child.

3. Read to them
We’re not talking about books that tell the stories of swashbuckling heroes and heroines. We’re talking about slightly less adventurous, but equally interesting books about counting and finance. In fact, there are a number of picture books out there that introduce the basic concepts of money and saving to your children. If you are wondering which books to start with, you could try ‘Lemonade in Winter: A Book About Two Kids Counting Money’ by Emily Jenkins and G. Brian Karas, ‘Little Critter: Just Saving My Money’ by Mercer Mayer or ‘One Cent, Two Cents, Old Cent. New Cent: All About Money’ by Bonnie Worth.

What to teach your child in primary school

1. Money is earned
It’s important for your child to understand that money isn’t just available for the taking. They need to understand that money is something that you earn when you work. While you will give them an allowance, you should also tell them that if they want more money, they will have to complete simple chores around the house. Reward them not just with money, but praise as well when they complete their chores. This way they learn that work is done not just for money but for a sense of accomplishment as well. This way you are giving them a taste of the real world.

2. Get them to save
The good way to get your child to save is to get them a piggy bank. Tell them that they can buy the new toy they want if they can buy it for themselves. Get your child to put aside a portion of their allowance every week until they collect enough to buy the toy they want. It’s often so gratifying to fill the piggy bank with coins that your child might not even want to empty it!

A better way to teach them about savings? Don’t get them a piggy bank. Get them a Money Savvy Pig instead. While they look like any other piggy bank, they actually have multiple slots and compartments for savings, spending, donations, and investing. Here’s what this will teach your child:

  • The amount they save can be for something they are looking to buy. You could open a savings account for your child and show them how the money is deposited and interest can be earned.
  • The spending compartment can be used for the portion of the allowance money they want to spend for that week. If they end up spending more than they have in the compartment, they will realise what it means to borrow from your savings. This will lay the foundation to better understand budgeting.
  • The donation amount will teach them how important it is to share with those who don’t have as much as they do. This is important because while you want to raise financially smart children, you also want to ensure that they grow up to be kind people.
  • With the investing portion, teach your child how to make money work for them. One way could be to show them how money can be used to buy things that can be sold to someone else for a small profit.

If you don’t want to buy a Money Savvy Pig, not to worry! You can also use multiple piggy banks or jars with these 4 labels.

3. Shop with them
Give your kids a taste of the real world by taking them shopping with you. Involve them when you make decisions by comparing different products and their prices. Make sure you have a shopping list and give your child the task of ticking off things that have been purchased.

Even if you are buying them a toy, take them shopping with you. Give them a budget before you enter the toy store and tell them to stick to it. If they want something that is beyond your budget, make sure they understand they need to save up for it to buy the item at a future time.

What to teach your child in secondary school

1. Get your child a debit card
Your child probably knows and understands technology better than you do. Anything they want is at their fingertips. Get your child to deposit their allowance into their savings account and get them a debit card. Sit with them and teach them how to create a budget and stick to it. It is important that children understand the risks of owning a debit card and the responsibility that come with it. He may be able to buy whatever he wants online, but reckless spending means he will have to go the rest of the month with little or no money.

Realising that even though he is using a card to make payments, the money is directly debited from his account, will make him think the next time he decides to buy something on an impulse.

2. Get them to start investing
So far, you have been teaching your child to save for things that he wants like the latest gadget or a toy. But at this age, it is important for them to start thinking about the future. Unlike the instant gratification you get these days when you buy something in the morning and it is at your doorstep in the evening, financial planning is for the long haul.

Help your child make investments that will reap benefits at a later age. Perhaps you could help them to invest in an index fund such as the STI. Teach them as early as you can about the Rule of 72, and how compounding will make their early investments pay off handsomely in the future.

It is important for your child to understand that saving for the future requires time and patience. Delayed gratification is a concept that will help them with many aspects of their life.

3. Talk to your child about your financial situation
This may be slightly controversial, but we think that it is important to communicate with your children about your financial situation. You don’t have to tell them everything, but make sure that they have a basic understanding of how much it takes to run the house each month.

You can start by introducing them to simple things like utility bills and show them how much it comes up to each month. Talk to them about investment strategies and ask them for their opinions. Make them feel like they too are contributing to the household.

And lastly, we can’t stress this enough. Tell your child if you are facing any significant financial difficulty. You don’t have to go through the details, but keeping your child informed will help them understand why you may have decided to cut back on certain luxuries. It will make them take small steps towards helping you as well. Moreover, kids, who understand the financial problems their parents go through grow up to not only be practical in their day-to-day life but also empathetic to others.

As parents, you only want the best for your children. You want them to excel at what they do, follow their dreams, and be successful in life. An important aspect of that success depends on how your child manages their finances. And it is up to us, as parents, to make sure that we do our best and that includes guiding them towards becoming financially smart.​​

This article was first published on BankBazaar.​

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