As parents, it’s important we teach our little ones about good money habits. According to a study done at North Carolina State University and University of Texas, communicating with children about money, is key. Conclusions from the study: “… even young kids are aware of financial issues, regardless of whether parents talk with them about money.
If parents aren’t talking with their kids about subjects like family finances or debt, the kids are drawing their own conclusions — which may not be accurate. Even if parents don’t want to discuss family finances with their children, it may be worthwhile to explain why they don’t want to discuss that topic.”
Good Money Habits
It’s never too early to get started. The OCBC Mighty Savers® Programme aims to teach children the importance of savings. Here are 9 simple ways to go about it.
#1 Make it visible – use a clear jar or review statements together
Not your usual piggybank, but it has its merits.
Many mums get fancy piggy banks for their kids to save money. Yes, they are great, but a clear jar serves the purpose. A clear jar allows kids to see how the money is growing: from a few cents to dollar bills. Discuss with your kid the value of saving and encourage him to save whenever he can.
Another way to keep savings visible is through reviewing statements together. E-statements are eco-friendly, can be saved (without adding to clutter!) and is a good way to see how savings has grown. OCBC’s Monthly Savings Account has no initial deposit nor minimum balance to maintain so there is no reason to hesitate about opening an account.
Plus, parents can easily oversee account activities because Monthly Savings Accounts opened under the OCBC Mighty Savers® Programme is a joint account between the parent and child (up to 16 years old).
#2 Give them an allowance
It isn’t a privilege — it’s a learning opportunity.
For slightly older kids, give them an allowance. Allowances mean a limited amount of money to spend every month, letting them value what they have. Some parents like to link allowances to chores done, but this might not be a good idea. Rather, teach money discipline by encouraging savings to be a part of their allowances.
Let them deposit and withdraw from their own account. It makes them feel very grown up and responsible. OCBC even provides a Mighty Savers® fast track on Sundays – a priority queue just for kids at Sunday banking branches.
#3 Develop a sense of ownership
It may seem trivial to adults, but it’s a big first for kids!
Allowing them to choose their first wallet can be an important money milestone. Likewise, opening a savings account under their name instills a sense of ownership that makes them more careful about spending money.
#4 Model good spending habits
We may not see them looking, but they notice everything — even how we spend!
A good way to develop sound spending habits is by exhibiting them. Little kids are watching you when you are out shopping. When you use a credit card, they see it but they won’t always see you paying the bill. Use cash whenever possible, so that kids realize that they can only spend what they have. It’s easy enough for even younger children to grasp that no cash means not being able to make purchases.
When you plan a trip to the grocery store, ask your children to make a list and stick to it. This prevents impulse purchases. It forces you to stick to your own list and budget as well!
#5 Hunt for good deals for your kids
Why not turn a weekly chore into a weekly lesson?
Teach your kids about saving money by looking for good deals on purchases. For example, when you visit the grocery store, encourage them to hunt for deals for their favourite items like yoghurt, raisins, and other items to keep them interested. For kids who are older, show them how to compare prices of items online, and research before buying.
Even monthly savings accounts are not all the same; showing your child the benefits offered by different banks is a good learning opportunity. The OCBC Mighty Savers® Programme offers 0.40% interest per annum (p.a.) for those who deposit $50 monthly and do not withdraw from the Monthly Savings account. Plus, if you have a CDA account with OCBC, there’s an additional 0.40% interest p.a., bringing the total to 0.80% p.a.!
#6 Teach them about opportunity cost
It’s a complicated concept, but the explanation is simpler than you think.
Teach kids that if they buy one item, they need to forego something else. This allows them to value what they have, and let go of what they don’t need. For instance, “if we buy a toy today, we will not have the money to buy the book tomorrow.” They need to know the difference between needs and wants.
If your child is old enough and into digital games, The OCBC Mighty Savers® mobile game app highlights the importance of making wise money decisions. Part of the game’s goals is to buy a certain number of items for the house but players must budget expenses wisely and can even decide to invest the money first. Download this game now at ocbc.com/mightysavers.
Find out more on the next page.
#7 Communicate
We may think that money is an adult topic, but the kids are ready to talk about it when you are.
There will be times when kids will make mistakes with money. If they lose money, make them realize the value of keeping money safe. The way you communicate plays a vital role in teaching them about money matters.
If one persistently asks you to increase his allowance to cover for a big item purchase, talk to him about saving better to buy the item.
#8 Giving is important
Teach them that money isn’t all about material possessions. Money can help you do good too.
Aside from saving and spending, kids also need to learn how to give. Some experts suggest spending 30%, saving 30% and donating 30%. It’s not a rule but it’s easy to remember. Once they understand a little more about money, take them to a local church or charity to donate the portion that you and your child agree on. Besides money, they can also buy books and toys and donate to an orphanage to understand the value of sharing.
#9 Tell kids the truth
It may not be an easy conversation to strike or have, but the effort will be well worth it!
Talk to kids about money. If there is a financial crunch at home, let them know that there is a need to save as a family, which means fewer toys and gifts. This will allow them to understand the realities of life. Kids need to know about the financial realities at home, and that money doesn’t grow on trees.
If you set the right foundation, your children will grow up with good money habits.
Ready to teach your child to be money-savvy mums and dads? To enjoy benefits such as an interest rate of up to 0.80% p.a. and a priority queue just for kids at Sunday banking branches, open an OCBC Monthly Savings Account with your child now.