Monday, January 12, 2015

Raising financially-smart children


JANUARY 12, 2015

The profile of the average Singaporean with debt problems is typically middle-income males in their 40s, said Credit Counselling Singapore, which has seen the average number of debtors seeking help annually go up. Many of these debtors are parents.

Their financial mismanagement could be passed to the next generation. Parents’ poor finances lead to money becoming a sensitive issue at home, which could have psychological effects on children who may not be able to lead financially-secure lives.

The reverse is also true. Parents who are savvy in financial management and teach their children to do the same will change their family’s financial destiny.

The financial skills learnt — planning, discipline and goal-setting — will also help their children to be successful in their career and life.

An ongoing survey conducted in Singapore and Malaysia by financial education company Jopez Academy, polling more than 220 parents, found that more than 99 per cent of participants had knowledge gaps about teaching their children about money.

More than 60 per cent do not know how to create good learning experiences about money for their children and are not aware that the first lesson about money that they have taught them is how to spend.

Asian parents spend a lot of money on children’s education, but do not realise that teaching their children financial management is the key to their future success, as money earned is money soon gone if their children do not know how to manage finances.

In my work, I observe that children’s mindsets about money are set at about the age of two because they learn through mimicry.

Children tend to mimic their parents’ behaviour, including spending behaviour.

Children watch how their parents spend their money at the shopping mall and will follow what they do and say.

This is why it is important to be mindful of your words, actions and emotions around money in the presence of your children. Otherwise, children will not inherit positive money mindsets, habits and attitudes.

At the age of four, children reach the stage of cognitive development where they can distinguish between their own knowledge and that of others.

Children aged five and above connect words to experience. Children at this age have sufficient vocabulary to articulate verbally.


It is vital that parents and educators have the right mindset, habits and attitudes about money and establish a consistent approach when it comes to teaching children about money because children learn by observation and example.

Between the ages of four and 12, children tend to be dependent and obedient to their parents, with minimum influence by their friends and external influences such as peer pressure. Therefore, this is the best time to teach them financial literacy.

Nurturing children in money mastery also enables them to develop self-discipline, as it involves delayed gratification, the ability to resist temptation, making difficult choices, accountability, responsibility and not succumbing to peer pressure. Hence, parents teaching their children such skills are also developing their children’s other life skills, which will contribute to their children’s success in career and life.

The key is to make it fun for children to learn about money management. You can encourage play by getting them to design their own money jars. What they create and design, they will treasure. And they will have fun putting their money into the different jars of Saving, Spending and Sharing.

Another way is to get children to do household chores and be paid for it. This will instil the value that money is a result of work, time and effort. They will plan to do chores according to a schedule and balance them with their schoolwork.

This will give parents the opportunity to teach their children values of diligence, strong work ethics and efficient time management.

When the monthly utilities or credit card bill arrives, showing it to your children will demonstrate that there are consequences for spending. If there is an increase in the utilities or credit card bill from the previous month due to their higher consumption or purchases, you can explain that to them and take some money from their allowance towards the payment of these bills.

They can also create posters, where they can paste pictures of the items they wish to buy on your weekly grocery shopping trip. With a fixed budget, they can determine which items they would like to buy.

Parents can be creative in the way they educate children on finance and life skills, making it part of raising their children, while leading them towards their path to success.


Ernest Tan is the founder and managing director of Jopez Academy, a financial education company. He is also the author of the book Raising Financially Savvy Kids.

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