Yahoo Finance 4 Practical Ways For Parents To Educate Their Children On Personal Finance
Financial responsibility is one of the essential aspects of life, and is often also the most complex to master. In recent years, some form of financial education has made its way to the curriculum but there are limits on how schools can provide children with comprehensive preparation in money management. Hence, we take a look at how parents can supplement their children’s financial literacy and development.
1. Start Early
Children as young as 3 have been shown to be capable of grasping basic concepts of money. As such, guidance is needed to ensure that they do not grow up thinking that money magically appears whenever needed, but rather is a result of having savings.
Therefore, saving habits should start young. Of course, depending on the age of your children, they may not appreciate the need to save, but they may still enjoy the activity of putting coins into a colourful piggy bank. Ultimately, it helps children to develop a basic sense of ownership of their assets while they watch their savings grow. This in turns reinforces a positive association with saving, which will provide a foundation for their future financial habits.
As soon as their children are familiar with the idea of saving, parents could go a step further and introduce them to budgeting, by splitting their allowances into groups for Saving, Spending and Investing.
2. Learning Through Games & Activities
To be fair, there are tonnes of things more appealing to a child than coins and plastic paper. But learning about money does not have to be dull, thanks to an increasing number of games, interactive resources and workshops now available to teach financial literacy to our young.
For younger children, day camps and workshops such as those organised by PlayMoolah and MoneyTree, provide a comprehensive yet fun introduction to effective money management. Participants in MoneyTree’s programmes are given “dollars” to spend, save and invest, and can also “earn” them by answering questions. PlayMoolah’s Moolahsophy boot camp incorporates healthy financial values into plays, games and stories.
Mobile applications such as PlayMoohlah’s Moolah It! helps children to learn the concept of budgeting and prioritising by letting them take snapshots of items they want and note down prices before ranking their choices. OCBC’s The Mighty Savers application, suitable for children aged 7-12, teaches concepts like working for money, saving, earning interest, budgeting and investing.
Games such as Wongamania and Cashflow 101 are suitable for teenagers and adults. Wongamania covers more complex aspects of economics and finance by mirroring realities of the markets. Robert Kiyosaki’s Cashflow 101 is also a popular game in which players can learn basic financial strategies and accounting concepts. Parents can play these games with their older children to help nurture their interest in the personal and global finance while learning a thing or two themselves.
Read Also: Wongamania Game Review: The Board Game That Teaches You Economics And Personal Finance
3. Involve Them In Household Financial Planning
A 2013 report by Cambridge researchers found that parents wield significant power in influencing their children’s money habits. If you are prudent with your own personal and household finances, chances are, such values will inadvertently be passed on to your children as they observe your actions and behaviour. But going beyond simply being a good role model for your children, involving them in family financial decisions can also help to increase their awareness of how money is and should be spent.
By involving your children in basic financial decisions, they become familiar with the concepts of handling money and the cost of things. By extension, they may also come to appreciate the value of their possessions more and be less likely to engage in impulse purchases in future.
4. Make It Rewarding
Rewards can go a long way in further impressing upon children the benefits of good money management.
For example, many parents open a savings account for their children but handle bank deposits by themselves. Allowing your children to be part of the cash deposit process (inserting the money into the machine or handing it over to the teller) and then letting them see how the numbers in their bank statements grow with each deposit helps them to understand the concept of savings and interest. Alternatively, you could also match your children’s savings, contributing either the same amount or just a certain percentage. This arrangement allows children to see their money grow the more they save and gets them excited about saving.
Perhaps you may want to teach them about the satisfaction of buying items with their own money: by paying them for household chores, encouraging them to save their earnings, and then giving them the freedom to buy something they want using their money. Not only will they feel proud of owning something that they had paid for themselves, they will also learn about patience and delayed gratification.
Conclusion
Educating our young about money and financial management is one of the most beneficial things a parent can do for their children. It will not just benefit their children, but will also allow society to reap rewards on a larger scale. Financially educated children will grow up to be financially literate and responsible adults, who will be less likely to have unnecessary financial burdens, thus reducing the likelihood of strained and unstable financial markets ridden with bad debts.
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