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Raising money-savvy kids

CASH, Shopping, Credit Cards and ... Debt

All parents strive hard to provide the very best for their children. Some are lucky to be born rich, but most of us have to work to make ends meet. Unlike in our parents' more frugal days when money was spent mostly on necessities, today, spending money has become something of a hobby or past-time. With credit being too readily available, many have fallen into the inevitable trap of living way beyond their means and racking up massive debts.

Rich or poor, good money habits are essential. Money is, after all, finite. The simple dynamics of income and expense apply, regardless of the colossal or meagre amount one possesses. The concern is universal: how do we inculcate good money habits? As with most things, the trick is to start early by encouraging discipline from a very young age. Nothing happens overnight.

Children and Money

For most of us, our earliest memory of money is probably owning a piggy bank, allowances and Chinese New Year, Hari Raya or birthday windfalls. The question is, when do we start lessons on money?

It is never too early to teach children about money. Most adults underestimate a child's ability to observe and comprehend, and to pick up our habits and put them into practice. Children today take to technology, trends and even money matters more easily than we give them credit.

But children who are used to getting their own way often take things for granted and fail to understand the value of anything. As with all good habits, it is never too early to teach your child the concept of choice, responsibility, how to value their belongings and to tell right from wrong.

So don't wait until they're teenagers! Start early to ensure that good money management habits become a way of life as children approach adulthood. All it takes is a little time, imagination, and lots of patience and effort to view the world from a child's perspective and show them that money matters are not dry or boring!

Bring Them Up Right

Children do not automatically become good money managers, especially if no one has taught them the value of it. Take time to talk to your kids about money, or come up with creative and fun ways to get them involved in the decision-making process such as saving up to buy a new toy, treat or holiday.

We spoke to three parents to find out how they are preparing their kids to face money challenges ahead.

Challenging your curious toddler and savvy kindergartener (Ages 3-6)

By the age of 2 years, most children would have developed a strong sense of their likes, dislikes and wants. Greater exposure to television and other media means more ideas, temptations and incessant demands. Letting kids choose and pay for an item they want can be a start to creating a concept of value and money. David, who has a five-year-old son, is in the financial sector and manages money as a profession.


"My wife and I started by introducing the concept of `scarcity of money' and the `either or' concept where with a certain amount of money, my son can choose to buy item A or item B but not both. Once he was older and could help around the house, we introduced the concept of having to `earn' money. Thus, by helping to sweep the floor or wash the car, he could earn extra money."


"The concept of working for money can be introduced from a young age. Once he can help around the house and grasp the concept of `reward,' he would be able to learn that one needs to earn before one can spend. I think this is important as it helps shape the child's spending habits. We hope the concept of earning before spending would prevent him from living beyond his means later on and racking up debts."


"Teaching a child this young to appreciate the value of money should be linked to material items he likes, such as toys, ice-cream etc. If he is careless with his money and misplaces it, then he is unable to buy his toy. Similarly, when he `wants' a more expensive toy, we tell him he cannot buy it now as he does not have enough money saved up. To afford it, he would have to work for the next week or so, and save the money before we can come back to purchase the toy."

Preparation for those pre-teen trials (Ages 7-11)

As your children get older, let them set small financial goals. For example, they might want to buy a bicycle or a new pair of sports shoes. Prepare them for the responsibility and choices ahead. Mrs. Lai runs her own media agency and her two elder children are aged 9 and 11. She shares with us what she has done to instil good money habits in them.


"I constantly encourage my children to save. My husband and I set up savings account for each child at a nearby bank when they were born. All their `ang pows', piggy bank money and saved pocket money are banked in twice a year. We bring them along so they get to go through their passbooks to see how much money they have accumulated. Because they are now 9 and 11, they can appreciate and are keen to see their savings even though it is just a few thousand ringgit."


"I have observed that they are very responsive towards giving to a good cause. They are quite compassionate as we do highlight the worthiness of giving instead of receiving all the time. There have been occasions when they've come across blind folks playing music at the roadside for a living and they give a ringgit each time."


"Children learn from their parents and more likely than not, they often emulate our shopping habits. When out shopping, they sometimes ask us to buy things. We help them go through the reasons for wanting the item. If they really want it, they will normally agree to pay for half or even the full cost of the item. We may not agree with their decisions, but we allow them to go ahead so that they can take responsility for their purchases. When they go out with friends (for birthday or group outings), they bring, say, RM50 and report to us on their spending."

Teenage money management (Ages 12-18)

Teenage years are wrought with growing pains. What with schoolwork, extra-curricular activities and a budding social life, a teenager today requires more money management skills than before, especially if you are preparing them for the eventuality of leaving the nest. Living expenses and college can be costly and teenagers need to understand that each pool of money has a purpose and should not be used for anything else. Allen is the sole breadwinner of a family of six and holds a senior management position in a financial institution.


"We show our four children the household bills such as the electricity, phone or water bills and explain how much utilities cost, how much our meals cost and covert them to easily understood currency like how many Big Macs we would have eaten to pay for last month's phone bill or how many weeks' allowance is needed to cover the electricity bill. We open savings accounts for our children and show them the amount saved. We also do goal-oriented savings plans, like getting them to put aside money for a holiday."


Allen also encourages his children to get part-time jobs, provided it is in a safe environment such as helping out in church. The main objective is not the pay, but the lessons learnt from working to earn money.


"To discourage my children from using credit cards unnecessarily and getting into debt, I often highlight bad news in the newspapers of people who fell into debt and borrowed from loan sharks. Managing credit and debt is a large responsibility that cannot be underestimated. We constantly emphasise the principle of living within our means."

So parents, it is never too early to broach the topic of managing and spending money wisely with your children. Being smart with money comes through careful lessons and not overnight miracles. With your guidance, your children will certainly have a solid foundation to build their finances as they grow into adults.
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