Ever heard of the term money parenting? Don’t raise an eyebrow just yet, we aren’t talking about spoiling your children or making every life lesson about money! But before we explain, let me tell you a quick story.
I am a 35-year old mum of three who believes that it is extremely important to instil good money practices in children. As such, we’ve started them on the journey as young as three. It’s really exciting watching the children learn from each other!
When I was a little girl, my father used to share with me a quote from Charles Dickens’s David Copperfield. It goes something like, “When your income is $20 and spending is $19.98, the result is happiness. When your income is $20 and spending is $20.02, the result is misery”.
He drilled this into me when I made a juvenile attempt at ‘leveraging’ the spending power of my primary school allowance. You see, there was something I really wanted from the school bookshop! Instead of caving into my pleading, he offered me a few options.
- Save your money and buy it when you can afford it
- Give up spending your allowance on something else
- Receive a small top-up according to how you much save every week
- Work for extra allowance! (meaning helping out with household chores)
And no, reaching into those festive hong baos was not even an option. Those were apparently savings for rainy days — whatever that meant. At the age of 8, I didn’t quite understand.
I wondered why it was a big deal for him to give me some extra funds when he clearly wasn’t short of them. But as I grew up, I understood. Now that I’m a full-blown adult with bills to pay and children to raise, I am so thankful for those early lessons on finances!
What Does Money Parenting Mean?
Money parenting is the process of educating children on the financial and social responsibilities that come with money.
It’s a way for us parents to pass on our attitudes and beliefs about finance to our children in the hope that this will have an effect on their financial outcomes.
Why Is Money Parenting Important?
It’s important to talk to children about money. Managing money is something that everyone has to do. It starts as early as managing that recess allowance in school so there’s no running away from it.
Having money management skills will have extraordinary benefits when your child is old enough to have actual money issues to worry about.
Talking to your children about money and instilling the right practices from a young age is one way to ensure your child knows how to manage their finances. What you really are doing is preparing them for their future.
What Matters To Parents?
Eastspring Investments conducted a survey among 10,000 participants in 9 Asian Countries — the Asia Money Parenting Survey — and found that 95% of parents believe it is very important to teach their child to use and manage money.
However, when it comes to money parenting, the average confidence index of parents, stands at 0.65 (with 1 being completely confident). Some of their concerns include:
- not knowing how to deliver successful money parenting
- wanting more knowledge, insight and tools to help them provide better advice to their children
- wanting to know what others are doing, so that they can learn and share successful teaching tips
- wanting to improve their own financial knowledge in order to provide the right guidance for their children
As a result, they often end up not knowing how successful they are, especially when there are no real metrics to measure their money parenting efforts.
5 Tips For Money Parenting
Based on expert advice, here are some tips to give you a head start in money parenting.
1. Start Early
Research shows that a good age to start would be when your child turns 3. By the time they are 4 or 5, you can explain the importance of good spending habits and by 7, you can get them started on a savings account.
2. Lead by Example
You are your child’s first and best teacher so even if you are earning comfortably, don’t go overboard with extravagant spending. Set a healthy example about paying bills on time and keeping spending in check.
3. Start Small
Start your children off with small amounts of pocket money and help them appreciate the effort of obtaining more money and understanding the constraints of the amount they have. This will also teach them how to stretch that dollar.
4. Make Them Work For It
You don’t want your children growing up wondering why they suddenly have to work for something that was once free. Instead of giving them free pocket money, even a simple thing like having them set the dinner table to ‘earn’ their pocket money goes a long way. Children who work for their money value the reward. This will also help to eradicate their fantasy that money grows on trees or falls from the sky!
5. Help Them Save & Grow Their Savings
When they are really young, start with the piggy bank and guide them to deposit something into it as often as possible. As they enter primary school, start a savings account and show them how it works.
You can even introduce the concept of ‘investment’ by topping up a certain amount for every, say, $50 that they save. You can further build on this by introducing them to compound interest as they enter their pre-teen years.
As always, it’s important to lead by example so have your own savings jar and let them watch you deposit money into it. When out shopping, teach them to make wise choices and discern between various prices.
These are some tips to get started but there is no one-size-fits-all approach to money parenting. If you’d like to know more about money parenting, take our quiz to see what kind of parent you are, and receive advice that best suits your personality.
You can also improve your own financial management knowledge by visiting our #MoneyParenting site or contact us for a partner financial advisor.
It’s never too early to start your money parenting journey. You play an important role in shaping the financial knowledge and skills your children need to be successful and happy in life!