How to teach your kids the value of money
MANILA, Philippines - Financial experts today encourage parents to start talking to their children about money as soon as they are able to count. You can take advantage of everyday activities to introduce the topic so that your children will not see it as concepts that they need to remember or memorize, but rather useful information.
A trip to the supermarket, for example, can be a very enlightening experience for children as they learn that there is actually a cost to the items that fill up their pantry.
Before your outing, why not share with them how much money you have allotted for groceries as well as a list of items that the household needs. Ask them to pick out their choice of specific items, say different kinds of cereals, and then explain how you decide on the final purchase based on the quality of the product and the family budget.
Apart from shopping for food, there are many other teaching moments in everyday events. Here are some of them so you can take advantage.
1. Buying a new pair of shoes for your child?
They will likely go for a brand whose advertisement they saw in a magazine or watched in television. Their pick can also be based on style, or what is popular. Talk to them about the value of comfort and durability, and how all these determine the product price and ultimately your selection. You can also take about Needs versus Wants. The style they Want is nice but their Need may require a pair of shoes that will last for the school year.
2. When you’re filling up for gas, direct their attention to the gas pump meter showing how much a liter of gasoline costs.
Translate that cost into everyday things so that your child will have a better idea about the value of money. Point out that a liter of premium gas which costs about P50+ can buy a kilo of rice (with change), 10 medium-sized eggs, two ice cream cones, or two rides in an amusement arcade.
3. Even visits to the arcade can be a learning opportunity.
If it’s a reward for good grades, you can talk about having a budget and why they should stick to it. Once you load their card, you can advise them to check out all the amusement options and that they have to prioritize because their reward will not cover all the games. It’s good to already tell them at that point that the budget is set, so no running back to you after a few minutes for additional load.
4. When you’re looking at making bigger purchases like a new television or sofa for your home, you can discuss the importance of saving up for these and why your choice will have to consider everyone’s needs, not just your personal preference.
5. Bring your child with you when you have to do bank errands.
While waiting in line, explain to her or him the concept of saving and how money kept in the bank earns interest. Show them your passbook or latest statement, and point out how your money is growing every day. You can also talk about the other people in the bank, and how saving is part of their lives too.
But perhaps, one of the most effective ways of teaching your child about the value of money is giving her or him some form of control, say an allowance; their entry into grade school is probably the best time to do this.
Give your child an allowance in small denominations, explaining to him or her what such amounts can buy. Get a piggy bank and encourage them to allot a sum from their allowance for savings. Help them set goals. When they reach a certain amount, for example, advise them to transfer their piggy bank savings into a real bank, so that it can earn interest.
Some parents provide incentive by giving an appropriate cash bonus when their child reaches a target saving amount. At the same time, allow them to make spending decisions. You can offer your wise counsel, but leave it up to them to make the final decision. If your son has set his heart on buying a limited edition comic book, or your daughter will buy a set of novelty pens, let them do so. They will treasure it even more because they know exactly how much they had to scrimp and save just to get it.
The important thing is to keep the conversation going. By being honest and open about money, you demystify the concept, making your children feel more comfortable with the idea of spending, saving, and eventually, investing.
Last but not least, all your lessons will come to naught if you do not practice them yourself. Children learn best through example. They will likely model behavior that they see often in their immediate environment. So if you are not careful about how you spend your money or are not keen about saving any, then your kids may just do exactly the same in the future. Yes, teaching your kids about money means learning a few lessons yourself.
Grow Your Money is an editorial partnership between ABS-CBNnews.com and Citi Philippines to promote financial education and provide helpful information to Filipinos on how to better manage their personal finances.
Visit www.citibank.com.ph for more information.