Financial literacy might be a lifelong learning journey for many of us, but one of the fundamental aspects of it is understanding the value of money.
In this post-covid world, things can be bought at a click of a mouse or a touch of a finger. Making purchases has become a mere routine action rather than a considered decision. Thus, it becomes an uphill task for parents to inculcate the true value of an item.
So, how can parents help their child start to be more discerning and be more awareabout money? Here are 5 lessons you can teach your child about money.
1. The difference between needs and wants
Climate change is real, and we can all do our part to reduce overconsumption by being environmentally conscious. Start them young by teaching your child the difference between needs and wants. This can help reduce impulse buying and accumulating material goods for temporary gratification.
For instance, we can go back to basics and ask, “Do you need this right now?” or “What would happen if you do not buy this?”. This helps them to internalise and realise if they truly need this item or not.
Looking at the bigger picture, it’s a good exercise for adults too, to go over what needs are versus what wants are. Talking to your child and asking them to point out which things in the house are needs or wants will help to re-emphasise this.
2. A weekly allowance to teach daily budgeting
The art of budgeting. There are many ways you can teach your child about it. One effective method would be handing out a weekly allowance. Of course, it is entirely up to you to decide the exact amount, but bear in mind your child’s maturity and needs.
For example, if your child is in lower primary, you might decide to give your child $25 to last him or her the full school week, which means a budget of $5 a day.
One of the quickest ways to learn how to manage money is simply to know where it’s going. If you give your child $5 but they don’t know where it went after a few days, it’s time to encourage them to keep track of what they spend.
You can also create a notebook or a “journal” where you and your child can keep track of the numbers and review them together for fun.
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To incentivise your child and kickstart the habit of saving, consider setting up a reward system where you match dollar for dollar what is saved from the allowance after a month, or implement tiered rewards based on the savings targets your child meets.
3. Let your child make small decisions
Following the same narrative, getting your child involved in day-to-day decisions can empower them down the road. You can get your child to pick out fruits from the supermarket, or even vegetables for cooking. As they grow older, they can learn to compare costs or, at the very least, understand opportunity cost.
This builds up their self-esteem and this sense of responsibility adds weight to their decisions. Besides grocery shopping, you can give your child simple choices and let them make up their mind. An ice-cream treat or fast-food dinner, a weekly activity to decide are all calls that the child will be able to take with practice.
4. Never ritualise tasks or attach a cost to routine activities
It seems that nowadays, life takes on a much more transactional approach. Gone are the days where friends pop by just because. The moral obligation to bring gifts or an item as a gesture of kindness feels very ritualistic and forced at best.
We have perhaps allowed such habits to rule so much that meaningless items are exchanged on occasions and if we are not careful, mindless gifting is something that your child might pick up.
Indeed, everyday activities should never be treated as transactions. Parents should inculcate a mentality of generosity and kindness that allows their child to do a good deed without expecting anything in return. This would undoubtedly help in not attaching a cost or a measurable value towards doing things for themselves or others.
5. Fun can be free and not funded
While this generation of parents will want to load up the days with endless activities from enrichment classes to indoor playgrounds to hobbies such as swimming, gymnastics and the likes, it could be worthwhile to spend quality time away from such planned schedules.
Take them to a day out at the beach, or even hike through parks and explore the sights and sounds of nature.
The outdoors, not your cup of tea? Head to the libraries and spend hours discovering new worlds through books and possibly workshops organised for children or even go learn about history at the museums.
Mixing such experiences as part of their growing up can teach children that there can be fun without having to always buy stuff.
Of dollars and sense
It’s never too early to start teaching your child to be financially savvy. You can help your child become financially independent through education. Establishing a solid foundation in basic money management and budget planning will go a long way in preparing your child for life in the real world.