I am an advocator to teach the children how to fish rather than giving them the fish. If we can teach children about financial literacy, this is a lifelong skill that will help them thrive. I attended a webinar by Moneysense and I want to shamelessly share what they taught the parents.
The key learning objectives are for the preschool children to understand that money is limited and there are trade-offs involved when spending. They need to understand the difference between needs and wants.
Activity 1: Categorize between needs and wants
Make use of daily household items to teach your children the different needs and wants. Together with your child separate the items in the shopping list into needs and wants. Discuss with your child why each of these items is a need or want.
The concept of saving
The key learning objectives are to advocate the importance of saving. The children need to differentiate the concepts of saving, spending, and sharing.
Activity 2: Save your treats
Give your child a healthy snack that they like, and encourage them to save a portion by rewarding what is saved in the morning with another of their favourite snacks later. For example, if they save one portion in the morning then reward them with one portion of a different snack after dinner.
Activity 3: Money Talk
Give your child notes and coins of different denominations. Let your child tell you the sizes, shapes, and values of coins and notes. Roleplay with your child at a simple market activity such as buying and selling to aid their understanding.
Activity 4: Create Savings Boxes
Give your child Savings Boxes which are empty and transparent. You can show them the way by saving some of their loose change in these containers.
Activity 5: Savings Box Approach
On special days, for example on their grandparents’ birthdays, ask your child to open their Savings Boxes and count the money inside. Encourage them to use some of their savings to buy gifts for their grandparents.
They need to learn about the concept of delayed gratification. The children need to understand that declining a small reward today can bring a larger reward tomorrow. They need to understand the importance of developing a long-term savings habit.
Activity 1: Matching your Child’s Savings
Set a saving target for your child, and offer a small incentive when they have saved a certain amount. This will be useful in the formation of a saving habit. This will become a habit. You can also match your child’s savings by topping up a certain amount at the end of the month.
The concept of Saving before Spending
This is an important concept for your child to understand how to budget using saving, spending, and sharing. In the webinar, the presenter will give an allowance of S$2.80 to the child and will let him/her save S$0.30 on a daily basis. The key is to dice up the allowance into 3 pots. They are Saving Pot, Spending Pot, and Sharing Pot. After that, the child needs to do his/her own recording or simple accounting. In the end, the parents can review with the child on their records.
Activity 2: Savings Box Approach
For lower primary children, talk to your child about the concepts of saving, spending, and sharing. Give your child 3 non-fragile empty transparent containers to help them visualize these concepts. Give your child drawing materials to let them create and decorate “Save”, “Spend” and “Share”. Draw a line on the “Save” box to represent a target savings level to be reached in 3 months. This money can be used to buy an item that they want.
Activity 3: Pocket Money Routine (For Upper Primary Children)
Give your child pocket money. For younger children aged 7 to 9, give them daily allowances. For children aged 10 to 12, give them weekly allowances. This provides them with actual spending and saving experience. It involves letting them learn from their spending decisions early in life.
Allocate the pocket money into saving, spending, and sharing using the pocket money record. Encourage your child to save for a goal by setting a saving target to buy an item that they want. Money management is about allocating and managing money wisely.
The child needs to prioritize savings first. Set the percentages to be saved, spent, and shared with your child. Subsequently, they can set their own percentages. Commit to a target to be met in 3 months’ time. Teach your child to track their spending by keeping a record. Discuss with your child with whom they intend to share this amount of money.
Teach your child how to work out saving, spending, and sharing totals using the money record. This will help them to keep track of the actual amounts and ensure that they are adhering to the amounts to be saved, spent, and shared.
A review is important because it helps them to reflect, support and act. Reflect is to let your child share the reasons for their decisions and work with them to review how they use their pocket money. Let your child share what they have learned and guide them to improve. Take your child to the bank to deposit their savings. It is a good time to open a savings account for them.
Concept of Budget
We can help children to understand the concept of budgeting using playtime tokens.
Activity 4 Play Time Tokens
Decide on the number of playtime tokens each week to be given to your child and the value of each token. For example, 10 tokens per week, and each token are worth 30 minutes of playtime. Your child will learn to budget their “spending” of tokens on playtime activities that they like. Over the course of the week, your child needs to manage their playtime based on the number of tokens they have left. Playtime tokens are a powerful tool to help your child understand the concept of budgeting.
Secondary School Children (13 – 17 years old)
The goals of this section are to teach older children to be smart consumers and to help them understand the different modes of payment. The learning objectives are to understand how to budget using a savings goal activity, understand the power of compounding interest, and understand the difference between needs and wants.
Activity 1: Savings Goal Activity
Ask your child to budget by using this formula: Allowance – Savings = Expenses
The concept is to pay yourself first and set aside savings before you spend. The child can decide on the saving frequency whether it is daily, weekly or monthly. Ask your child to think of an item he/she wants and tell you the cost. Ask how much is he/she prepared to save each month for the item. Work out how long it will take to save for that item. Use different scenarios with varying savings amounts and expected interest rates so that your child can appreciate the power of compounding interest. Make a date with your child to buy that item together to celebrate achieving the goal.
Activity 2: Being a Savvy Consumer
Give your child an imaginary amount of money to simulate a shopping experience. Make a list of items that he/she is interested in. For example, mobile phones, IT gadgets, and clothes. Compare prices of similar items from newspapers or websites with your child to find the best deals. For online shopping, he/she may check if there are any ongoing promotions, delivery charges, and the minimum amount to purchase for free delivery. Finally, is he/she able to get the best deal using the imaginary budget? This helps your child to learn about budgeting and comparing prices.
Understanding Payment Methods
Understand the advantages and disadvantages of the different modes of payment, and considerations when using credit. Be familiar with good habits when using non-cash methods of payment. Learn how to avoid being scammed.
Payment is carried out using banknotes and coins. It is the most common method of payment. Different countries use different currencies. The key advantage is the widely accepted method of payment. The disadvantages are not safe to carry large amounts of cash as it can be stolen or lost. Coins can be heavy and bulky to carry around. When traveling, you have to buy foreign currency and the exchange rate may not be favorable. Cash cannot be used for online transactions.
Electronic payment is any kind of non-cash payment that does not involve actual cash. examples of e-payments include PayNow and e-wallets for mobile phones. The advantages are faster transactions as there is no need to transact physically in cash. It is convenient as you can use apps on your mobile phones. Electronic transactions are easier to track, as they are recorded electronically. The key disadvantage is security and privacy concerns as card or account details may be stolen.
A debit card is issued by the bank. The purchase amount is deducted from your bank account when you pay with it. The advantages are easy and convenient to carry around, can be used for online purchases and transactions, and is used where credit cards are accepted. A debit card can be used to withdraw cash from a bank account, it instills discipline as you can spend what you have available in your account. The disadvantages are security and privacy concerns as card details may be stolen, it may result in spending more than one intended as no actual cash is involved.
This is a type of e-payment. It is borrowing as it allows you to buy goods and services on credit. You need to pay at a later date when the bill is due. You sign on the sales slip or tap your card when you pay with your credit card. You are billed once a month. The advantages are easy and convenient to carry around. Most credit cards are widely accepted in many countries. It can be used for online transactions. The disadvantages are security and privacy concerns as card details may be stolen. The interest rate of 24% p.a. or more will be charged if you do not pay by the due date and can quickly snowball. Several other fees are payable such as late payment, card replacement, and cash advance. With the buy now pay later mentality, you may buy on impulse.
Activity 3: Considerations when using credit
Pick a few scenarios to start the conversation with your child on deciding the appropriate forms of payment. For example, buying fish in a wet market, shopping for a washing machine, and dining at fast food outlets. Discuss the pros and cons of the different kinds of payment and using credit. If the item is expensive, it may not be practical to carry a large amount of cash. You may want to consider cashless payment methods.
Many shops accept credit cards which are a convenient form of payment. However, remember to use a credit card responsibly. Pay your credit card bills in full by the due date to avoid interest charges and late payment fees. Also, make sure you keep your credit card details secure by taking the appropriate precautions.