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.

In last month’s issue, we talked about Assets and Liabilities. This month, we will be looking at Rich Money Habit #3: The Rich have Money work hard for them, the Poor work hard for Money.

The Rich always spend less than they earn and they save the rest of their earnings. With the Money that they saved, they would invest it in different investment instruments. Their investments would then give them returns and help them make even more Money. In other words, the Rich put their Money to work for them.

The Poor on the other hand, normally spend all the Money they make (some even spend more than they make - causing them to be in debt). And because they spend all the Money they make, they have nothing left to invest. All their Money is spent buying liabilities that would not help them earn more money. That is why, the poor ALWAYS work hard for Money and they often wonder where all their money disappeared to and why they remain poor!

In summary, the Rich have Money work hard for them while the Poor always work hard for Money. So kids, if you want to be Rich, put your Money to work for you!

In next month’s issue, Rich Money Habit #4: The Rich choose their friends wisely.

In last month’s issue, we talked about the difference between the spending habits of the Rich and the Poor. This month, we will be looking at Rich Money Habit #2: The Rich buy Assets, the Poor buy Liabilities.

What are Assets? Assets are things that put money into your pocket, hence making you Richer. An example of an asset is a House. If you bought a house for S$ 200,000 and 2 years later, you manage to sell the house for S$ 230,000, you would have made a profit of S$ 30,000. Selling the house put S$ 30,000 into your pocket; hence a house is an Asset because it makes you Richer!

Liabilities are things that take money out of your pocket, hence making you Poorer. An example of a liability is your hand phone. If you bought the latest, coolest hand phone for S$ 1,000, and 3 months later, you decide to sell it off. Do you think you can sell it off for a higher or lower price? Right! Lower price! You would probably be able to sell it off at S$ 800 and you would have lost S$ 200. Selling your hand phone took S$ 200 out of your pocket; hence a hand phone is a liability because it makes you Poorer!

The Rich buy Assets, the Poor buy Liabilities. So kids, if you want to be rich, buy Assets, not Liabilities!

In next month’s issue, Rich Money Habit #3: The Rich have Money work hard for them, the Poor work hard for Money.

Too Young to be Exposed to Financial Literacy and Good Money Habits?

Think Again!When it comes to Financial Literacy, most people would immediately think of personal finance, financial planning or investments such as insurance, mutual funds and the stock market, just to name a few. The common mis-perception of the topic of financial literacy is that it is a topic that is reserved for adults or at least, for people who have already joined the workforce.

I find it rather interesting that we spend more than 15 years of our lives preparing ourselves for a job in the marketplace but we do not, or at least, most of us do not even spend half that amount of time preparing ourselves to be financially literate. The term Financial Freedom, which in my opinion, is an overused cliché is something that most of us are working towards. But the important question is, how many of us actually PREPARE for it? How financially literate are we to DESERVE Financial Freedom? Most of the times, when I ask people that question, the reaction I receive from them is a mixture of confusion and surprise. Confused and surprised because they never thought they’d have to PREPARE for it. They naively think it will come if they just BELIEVE in it.

Again, isn’t this interesting? You spend at least 15 years of your life preparing yourself through formal education to be able to get a job. You prepare yourself to be able to drive by attending driving lessons. You prepare yourself to be able to operate machineries by reading through the instruction manuals. In fact, you even prepare yourself to look good before you go out on a date. But why is it that most people are surprised when you tell them that they have to prepare to be financially free?

Most of us grow up thinking and believing that we would eventually be able to achieve Financial Freedom if we adopted the age old philosophy of working hard, saving our hard earned money and practicing the virtue of frugality, not knowing that we actually get poorer each day if we save our money in the bank. We naively believe that we are ready and educated enough to know what to do with our money or know how to manage our personal finances once we obtain a degree from the university.

So what happens is, most of the youngsters go out to the real world and they start making all sorts of mistakes that would cost them severely. Most youngsters who join the workforce have no idea what to do with the money they earned. They are excited about the fact that they are starting to earn their OWN money, that they would be able to spend it on the things they like, and that no one is there to control them or tell them what to do with their money. They have the full freedom of choice on how to spend their money. And sadly, this is when unfortunate things start to happen.

Since they do not have a clue how to manage their personal finances, they look around and ask their friends, who, in most cases are as lost as they are. With Credit Card salespeople offering (or rather begging to give you) credit cards at shopping malls, these youngsters start taking up credit cards and begin to abuse it. They start spending “future” money believing that they would eventually be able to pay it all back in a “just-a-matter-of-time” mentality (please don’t get me wrong, I’m not saying credit cards are bad, they’re not! In fact, credit cards are very powerful tools to use, IF you know how to use them properly). They start “investing” (or more like gambling) in the stock market, not knowing what it is and how it works. They start acquiring bad financial habits and before they even know it, they are already heavily in debt. Then they start wondering what hit them and how they got to where they are.

That’s why it is no surprise that the Singaporean credit card debt as of December 2008 stands at an excess of SGD 3.4 billion. What’s even more disturbing about these numbers is, a large number of these debts belong to credit card holders who are under the age of 30.

Creating the awareness and teaching adults about the importance of financial literacy, in my personal opinion, is not the long term solution to solving this problem. Reason being, most of the bad money habits that the adults have, are already hard wired into their minds. It takes way too long to get them to change. What if we started teaching the kids instead? What if we taught kids good money habits? What if we taught them about the importance of savings and the different investment vehicles like the stock market, mutual funds, options, and a whole range of other investments? What if we prepared them for financial freedom at the habit forming ages of 6 - 18?

Most people smirk when we tell them we teach children ages 6 – 18 about financial literacy; savings, different types of investment vehicles, the banking system, inflation, supply and demand…etc. They think their child is too young to learn financial matters. They don’t believe their children would understand a subject which adults themselves are having trouble understanding. However, we firmly believe that no child is too young to learn anything. The challenge is not whether the child would understand what we are teaching, the challenge is whether you know how to teach it to them so that they can understand it. And based on this belief, many children have benefited from the lessons that we teach.

I firmly believe the time has come for parents to wake up to this disturbing trend which would certainly affect their children in the future. The thing is, if you don’t provide them with the opportunity to acquire money habits through the right channels, they will still acquire it through their friends who are as lost as they are. The difference is, one is going to help them form good money habits, and the other, bad money habits. Which one would you wish for your children?

The MONEYTREE™ Program is a unique program designed to educate and develop financial intelligence amongst today’s young generation (from ages 6 - 18) so as to prepare them for the financial challenges they will meet in their future.

Click here to download PDF version

TEACHING KIDS FINANCIAL SURVIVAL SKILLS

Most parents love their kids, but many don’t give them the tools they need to survive in the hard world of finance. This is more evident in Asia than anywhere else in the world.  Most place greater emphasis on academic excellence than on the acquisition of practical and important “survival skills” such as financial skills.

In doing so, the younger generation may not see the necessity to acquire these skills and in turn, “invest” more of their time into their school work , some of which they would find have little practical use when they join the workforce.

This is part of the general misconception  that says “Knowledge is Power”.

In MoneyTree, we have a different opinion - “Knowledge is NOT Power, The APPLICATION of Knowledge is”, as can be seen through the words of Jerome Bruner, Father of Cognitive Psychology:

“Learning is most often figuring out how to use what you already know in order to go beyond what you currently think.”

During a 1996 talk at the Harvard Graduate School of Education, educator Tom Snyder talked about the changes in the sphere of education:

Learning is something that happens between two people. Technology lets people interact with each other; like a book lets us meet a person from another time and place. The transaction takes place between what the writer puts in it and what the reader gets out of it… To know is not enough-you must be able to apply knowledge and demonstrate it in context.

To illustrate just how damaging this lack of financial intelligence can be to a kid, here are two true stories.

Jenny and Jack (names changed) are married, have two kids ages four and six. Jenny is in school full time and works part-time, Jack has a full time job. Every skinny cent this couple makes they spend on new cars, useless incidentals, junk food, etc.

They’re currently going through bankruptcy. The couple is being evicted from their apartment, their internet service is discontinued which Jenny needs for school, and there is little food in the house.

In a discussion, Jack said, “I can’t wait for this bankruptcy to be over so we can get rid of all these bills. I want to buy a new car.” But we can’t lay all the foolishness on Jack. Jenny was paid $100 for helping clean a lady’s house. That money was spent the same evening it was earned. Jenny and Jack hired a babysitter, went out to dinner, went to a movie, and then out for dessert afterward.

So how can they be so stupid? It’s easy; nobody forced them to behave otherwise when they were growing up. Nobody taught them about saving for the things they wanted. Why should they have saved for anything when Mom and Dad paid for them to have what they wanted the instant they wanted it. Nobody taught them the importance in paying off debt; after all, they never had to pay Mom or Dad back. And nobody taught them that bills needed to be paid before entertainment.

Soon though, it’s going to be payback time because this couple will be moving in with Jenny’s mom. How nice for her mom. There’s just one word for this whole scenario. WOW!

Incidentally, when Jenny takes her kids to the store, if they point and scream, she buys. Another generation coming up.

This lack of values regarding the handling and earning of money is also apparent in Joe’s family. You’re going to find this hard to believe, but visualize yourself raising three boys. They are all grown and in their twenties. One is married. All three boys and one’s wife are living with you and your spouse in a two bedroom apartment.

In this situation, the boys don’t feel the need to contribute a cent to the household coffers; they spend their money on themselves. After all, why shouldn’t they? That’s the way they were raised. What Mom and Dad earn is theirs and everything they earn is exclusively theirs also.. The sad reality of this story is that Mom can’t bring herself to boot the boys out. When Dad tried to force the “kids” to move, Mom kicked up such a fuss that he gave up and moved into another apartment.

Here’s some food for thought. If you don’t want your kids to be so ill prepared that you and the kids end up paying a huge price, there’s a short list of things you will need to do.

1. Unless it’s a holiday or birthday, don’t purchase toys for your kids. The exception would be if the child has done something really worthy of a reward. Under no circumstances should you reward a child for misbehavior and demands. Examples of that would be screaming tantrums or nagging to get you to buy something.
2. Pay the kid an allowance, (around seven years old you can start this) and make it sufficient to purchase clothes and pay for entertainment that is exclusively for him or her. That would include new toys, going to the movies, etc. Teach your child that necessities come before nonessentials. Clothes for school come before movies, skating, new toys, and so on.
3. Teach your child to put aside extra money when he or she wants to purchase a more expensive item. Don’t allow the child to borrow for it unless there is a very  good reason. For example, the purchase of his Scouts’ uniform .
4. If you loan your child money, see that it gets paid back. If your child breaks something borrowed from another, see that he or she replaces the item Also insist the child returns anything he or she borrows.
5. Sit down with your youngster and teach him how to budget her allowance. This instruction will help her when she is just starting out on her own.
6. Teach your child how much is lost by spending too much for an item that could have been purchased elsewhere a lot cheaper. For instance, a can of  drink out of a machine for $1.20  that can be purchased at a store for a dollar.

If you tend to be like Jenny and Jack, it’s time to get your act together or you’ll always be scrambling for a buck. Get the training you need in finances so you will be a good parent and good example for your children.

To add to these, credit card debts amongst the younger generation is at an all time high, young entrepreneurs are closing down their businesses as fast as they were set up and the rising cost of education has made it difficult for the lower income to raise their station in life, and creating a situation of hopelessness amongst the needy

Some of these six rules may seem harsh, but your job is to teach your child survival skills and in our society one of those skills is the ability to handle money wisely. This is just as important a part of your child’s training as his or her formal education. If you fall down on the job, not only will your child pay the price as an adult, society will pay it.

In addition, your negligence could well come back to bite you Think about your kid moving back home with his or her spouse and your grandkids in tow. If that happens, you may wish you had done something years ago.

That’s why at MoneyTree, we believe that to effectively  solve these problems, education is the only path with Long Term results. The problem needs to be addressed Early, while the individual is still at an age where good habits can be taught… and acquired

With this in mind, through our existing infrastructure, we plan to use Education as a tool and a series of Interactive Activities (based on our “Learning Through Play” principle) to implement the MoneyTree syllabus - making the learning process - a fun-filled experience.

The content of the entire MoneyTree Program is built upon 3 Principles (named RIM):

a)      Relevance : The entire content takes into account actual practices in the commercial world, current market conditions and the business & investment landscape. Students are taken on an educational journey that gives them an insight to the spoken and sometimes unspoken rules that govern the world of commerce and industry

b)      Interactivity : Our content evolves around the findings that students learn best when they are engaged visually and through audio, participate in experiential learning and ultimately share their experiences. As such , all sessions are highly interactive and draws students to participate.

c)      Measurability : It is imperative that a students progress throughout the program is measured to ensure that inherent weaknesses can be addressed for optimal results. At every step of the way, through our Work Sheets, Assignment , Simulations, Portal Game Play and Activities, we have assessment measures in place to track the student’s progress.

Give Your Child A Financial Head start today!

For more information on MoneyTree, contact us at (T) 6338 5635, (@) support@MoneyTree.sg or visit our website www.MoneyTree.sg