RELEASED DATE 12/02/2020
There is a diverse range of payment methods for purchasing a certain good, from crypto currencies to mobile payment and more. As a result, finance knowledge has become more complex. Here are some tips for parents to teach their children about money.
Start at an early age
Many parents find it hard to teach their children about money. Most usually question on what parts of finance their children should know, or the appropriate time for discussing this topic. Some even concern that the children might be “infected” with their parents’ money anxiety. However, the money lesson cannot be avoided, as the kids might have difficulties in dealing with financial issues when growing up.
A research from University of Cambridge revealed that children are able to grasp fundamental concepts of money between age 3 and 4. When they reach age 7, the fundamental concepts of financial processing behaviors will develop further.
Parents can turn any daily activities to an opportunity for money lessons. For example, let the child use your mobile calculator to sum up the total cart price while shopping, or explain the difference between “needs” and “wants”, or even ask them on how to save money during shopping. It is important to teach them distinguish between different methods of payment, such as cash, credit card, debit card and online payment.
Encourage saving habits
It might be challenging to keep children from spending their money (could be a birthday present, lucky money, etc.), especially when they are always tempted by toys or sweets. Don’t rush, but gently explain to them that the more savings, the more sweets and toys they can buy, so that they may understand the benefits of careful consideration before spending.
Give them chances to earn money. They should be allowed to use internet to compare the prices and figure out the differences between expensive and cheap items. Younger children may be instructed to cut out vouchers, and learn that each voucher you use for shopping will correspond to the amount they have earned. Furthermore, parents should openly discuss with children about how to allocate such amount between spending and saving. This saving game will get the children excited about money management.
Teach children about budget
Discuss with them about the concept of budget and different types of budget, such as budgets for fixed living expenses, loan payments, grocery expenses and transportation costs, etc. Instruct them to budget and calculate their own necessary expenses. This will help them learn how to prioritize needs over wants and prepare a long term goal for larger spending.
Warn them about unexpected expenses
Financial perception is not only about how you spend and save, but also about how to guarantee your future financial needs. For example, teaching your children early about undesired risks in the future, such as illnesses, accidents, and so on, will enable the children to comprehend the benefits of financial preparation for such events.