Sunday, August 17, 2014

How To Teach Kids about Saving Money $$

Starting a family calls for good financial habits. We've to be responsible not just for ourselves, but for our partners and kids. The boy and I have a few insurance and investment-linked savings plan that we started when we became working adults in Singapore. These plans help us to stay focused in saving money with a regular sum automatically put aside each time. Very convenient for a scatterbrain like myself.

As Lil Pumpkin is nearing her entry into Primary 1, we want to get her ready for the "big change" as much as possible. It's not only about prepping her academically, but making sure she's equipped with the proper life skills as well. She needs to know things like what to do if she falls sick, if someone bullies her, how to not give in to peer pressure, and even be responsible for her own money {try not to spend it all in the bookshop my dear!!}.

There was one time Lil Pumpkin felt sick outside and puked over her dress in the restaurant. Silly me had forgotten to bring an extra outfit out for her so we had to buy her some new clothes. A few weeks later we were out and I told her to be careful not to dirty her clothes when eating. She told me, "don't worry mummy, just buy a new dress!" Errrr... It was quite an innocent statement but it made me realise that she doesn't know that buying something isn't so "easy". Although we don't need to live from hand-to-mouth, we all have to make choices and priorities about what spend. It hit me that Lil Pumpkin needed to be taught about money and its value.

I read from a Cambridge University study that most children's financial habits are formed by age 7 so really, it's not too early to get Lil Pumpkin into the habit of saving money now. But even for us adults, it can be a bit tricky understanding how to use money wisely. What more young kids? We tried just talking to Lil Pumpkin but felt that she definitely needed simple, concrete and visual examples to understand the concept of money and its uses better.

These may not be fool-proof ideas, but here are 5 simple ways we motivate Lil Pumpkin to save money:

1. Give Daily Allowance
About last year, we felt that Lil Pumpkin was old enough to understand that money comes from effort and we wanted her to be more responsible about her toys and belongings. So at the end of every day after she finishes certain chores {according to our Responsibility Chart} e.g. vacuuming or folding laundry, she'll receive some money. If she doesn't finish her chores, she doesn't get her allowance. Simple.

It was hard getting her started and disciplined but Lil Pumpkin likes the idea of getting "stars" everyday for her good work now. She puts it up herself, and makes sure to ask for it when I forget to give her haha. Lil Pumpkin also knows now that money doesn't drop from the sky and puts more thought into how she should use it. It's not just pieces of paper or metal coins. It has a value. Should she buy that Milo bar now and take longer to get that Elsa doll? Or just put it all in her savings jar?

2. Money Jars for Different Purposes
Whenever Lil Pumpkin receives money for her daily allowance, birthday, good behaviour etc, she gets to choose whether her money goes into "Saving", "Spending", "Donating" or "Investing". It's a very tangible way for her to see how her money is used and she gets a sense of ownership and accomplishment as it fills. We made our own money jars, but you can probably buy yours as well online.

For things she likes to get quite often e.g. stickers or snacks or intends to spend soon, she'll use money from her spending jar. Money from her donating jar is used for tithing, buying gifts for friends, or giving to charities e.g. SPCA/SCAS statues at supermarkets {she calls them her "friends"!}. For more expensive items that require a few weeks of saving, she uses money from her saving jar. Money from her investing jar is to be kept long-term for her POSB account and we bring her to deposit the money after a few months.

3. Rewards for Saving Money
Every 2 weeks, we give Lil Pumpkin a small prize as motivation e.g. extra iPad time {she only gets to use it during weekends}. If she hasn't been spending money or has saved to reach a certain goal, we would also reward her. Like recently, she wanted to get a new Koeda-chan playset and saved towards that. When she finally saved enough to buy it, we threw in more figurines for her as well as further encouragement to continue this good behaviour.

Sometimes if she has difficulty reaching that goal, we'll help her out as well. For us, the most important thing now is that Lil Pumpkin has started taking the first few steps in her journey of saving money and we want to keep her going. At her age, saving for more than 2 months without seeing the end prize might be too frustrating.

4. Set an Example
I guess as parents we influence ours kids the most when it comes to their financial behaviour. When we buy something big or do something expensive e.g. traveling, we explain to Lil Pumpkin why it was needed or how we worked hard towards it. We have a family "travel" jar and although it's just a token jar, the boy and I will put in money to physically show Lil Pumpkin that we save too. Lil Pumpkin also chips in, of course!

The boy and I also have open discussions about our finances and how we use it. We don't hide this from Lil Pumpkin and she's free to ask questions when we talk about money e.g. what we do with it, how we think we can grow it, which worthy causes we should support and so on.

5. Learn through Games and Fun
I think fun is an important factor when teaching kids anything, including money management. Monopoly is one of our family's favourite board game and has helped us to teach financial concepts to Lil Pumpkin. Another game that Lil Pumpkin likes to play involves her make-believe supermarket. She's the cashier and we pay for items using real money. This way, she recognises the different denominations and has an actual sensing on how much things are worth in the "real world". Unless you are in Japan, a melon should not cost more than S$100!! :P

Whenever possible, we also show Lil Pumpkin that there's fun in frugality through crafting with recycled items, going to the library, playing at outdoor playgrounds, participating in heritage walks etc. All free, by the way :)

It's not easy but we reckon parents have a great role to play in proactively teaching their kids how to save. What are your saving money tips for kids? Let POSB know for a chance to win S$50 NTUC vouchers via this short survey. Good luck!

For more of  Lil Pumpkin's Primary School journey:

For tips on P1 preparation:

Disclosure: This is a sponsored advertorial for POSB Bank Singapore. All opinions are my own.



oomph. said...

i need to get my son started on this!!! great tips and ideas here...need to get on that responsibility chart :)

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GrowingwiththeTans said...

I love this! Noah has been asking me to "Buy! Buy!" whenever he sees something he wants, so I really need to try and teach him to save money. Will try giving him some money jars to start saving soon. :)

Masshole Mommy said...

I really need to get better at teaching my kids about money. I want to buy them one of those counting banks because I think that would help them.

An Apel a Day said...

Those are great ideas. I need to take my kids to the bank to have them empty their piggy banks, and put the money into their savings accounts.

Susan said...

We haven't really taught Sophie about money matters yet. But she does know that we can't buy her things on a whim and toys are only reserved for occasions for her birthday and Christmas. Recently, she also started saying things like, we can't anyhow buy things so that we can go holidays right? I like her priorities and at least she knows that holidays are a special treat :)

Stacy said...

Ooh good topic. I've already started mentioning when something is 'expensive'. I'm such an accountant that the kiddo's might absorb enough money-sense just from breathing the same air hehe.

Unknown said...

Wow, It's amazing that you're already teaching your kids to save money while they are young. If they grow older a little more you should also introduce the Passive Income concept to him/her. In that way at young age they could start and think big.