MoneyTree AsiaPac

published in Today’s Parents magazine

August/September 2009

by Thio Eng Huat

Picture this; you are leisurely wandering at a well-laid luxury store, listening to the store’s piped-in bossa nova when your tranquil shopping moment is shattered by the ear-piercing shrill of a child quaking in the throes of tantrum, screaming “I want this!”, “I want this!” repeatedly to its parents. The child’s parents attempt to pacify their child, studiously ignoring the shocked looks of shoppers. Not a situation any parent would want to be in but it does happen.

As a father I can relate to how parents would want to give their children everything they desire. Today, children have access to more sophisticated toys and gadgets with the television, media and Internet being a constant source of revelation on all things new and shiny. However, as parents, we also want our children to form good money habits. How do we keep them from turning into the “I want!” generation that seeks instant gratification to one that appreciates value? 

learning about choices
It may be difficult at first but begin with not overly indulging your children by agreeing to everything they want. Get them to make choices and stick to them. Say for example, on a shopping trip to the supermarket, you may have given your child enough pocket money for one type of candy as a treat. When you get there, your child suddenly wants two kinds of candy.

Instead of giving in, you can explain that they can have one or the other, but not both. If they choose to buy that bag of gummie bears now, they can save the rest of the money to buy something else on your next trip to the supermarket. If they choose to buy both gummie bears and lollipops now, they will not have any savings for the next visit and neither will they be getting any additional money.

Your children will learn about the consequences of choices, which is more meaningful than just do’s and don’ts.

where money comes from
Even when your children are young, you can still teach them about how money is earned so they understand that money does not appear from your pockets or from that magic box in the wall.

It could be as simple as telling them that when they don’t see Dad/Mum at home during the day, it’s because Dad/Mum are busy working. When you work, you get paid money, and you can only spend that amount you are given.
Paying them an allowance helps them understand the consequences of being paid according to a schedule. For this to be effective, it is best to stick to a fixed routine of payment so they get used to the practice. This can also be a lesson in budgeting and living within your means. Your children can choose how much to spend or save from their allowance, but they have to understand that if they run out, the money will not magically appear from your pocket.

Asking them to do chores for money, like helping you wash the car, illustrates the concept of exchanging time and effort for money, which is what you do as parents. Whether you decide to do both or only one of the above, explain that they can only spend what they are given or they have earned.
When children actually experience the amount of work that goes into earning a sum of money, they learn to value their money.

the meaning of savings
While learning to save is also a good lesson in goal-setting, it is just as important to teach children about the significance of savings. It is about learning what this sum of money can be used for. As they grow older you would probably want to teach them to save for carefully chosen purchases. This way they learn to save not only for their own needs be it a new mp3 player or a new pair of running shoes, they also understand the importance of putting money aside for a rainy day as they grow older.
rewards and incentives
I know of people who also “reward” their children with cash when they do well. While incentives can be a good source of motivation, personally I prefer to give rewards based on performance, and only on very special occasions.
Just as you would not pay someone a bonus simply for showing up at work, you would not want to reward your child for passing an exam with 50 marks out of 100. At the end of the day, you also want to encourage your child to do his or her best in their studies because it is important for their future, not because there is monetary gain to it.

sharing
Another valuable life lesson is making your children aware of the plight of the less fortunate. If you give money to a charity, let them know what cause the money is going towards and why the people you are donating need the money. Young children are naturally curious about the world around them and will ask questions about why other people do not have the same things that they have. You may be surprised, this may even motivate them to want to actively give their own money to help others.

show and tell
If there is one thing I have learned as a parent, it is that nine times out of ten children are more likely to do as you do, and not as you say. One method I have found helpful is to “show and tell”.

For example, you can use everyday events to teach them how to compare costs. When you take your family out for dinner at a nice restaurant, save the bill. The next time you go to a food court, save the receipt from that meal, and then compare the difference between the two amounts. Explain how the total amount from the restaurant dinner could actually buy you several meals at a food court.

You can also emphasise that dinner at a restaurant is a special treat, and not something that you do every day precisely because it costs so much more. There are many opportunities in your everyday routine that you can turn into simple, meaningful lessons.

Get your children involved in the family finances in a positive fashion. Avoid arguing about money in front of them. Set an example by getting your own finances in order, as your habits and your views will have an effect on shaping your children’s money values.

By encouraging good money habits when your children are still young, it becomes easier to get them to understand the significance of good savings habits and sensible money management as they grow older.

~ This article is contributed by Thio Eng Huat, Vice President and a Licensed Financial Adviser Representative with ipac financial planning Singapore private limited, which is licensed with the MAS, Financial Adviser’s Licence No FA100003-3.
For more information, please email financial.planning@ipac.com.sg

In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any person. Before making an investment decision, you should speak to a financial adviser to consider whether this information is appropriate to your needs, objectives and circumstances.

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