Do you know how to manage your money? Did you learn about money management when growing up?
I can’t remember exactly when I started to receive the weekly allowance from my parents during my school time, but it would be at least junior high school time. What I remember is I received it without the need of doing any housework at home. My job was to study and make sure that I passed my exam to go to the next level.
I had lunch prepared so I could save all the allowance or to buy whatever I wanted. I was given the freedom to choose my options. I saved it weekly and then spent it at the end of the month. My late father was quite relaxed about it, but my mother was quite vocal about what I spent on.
I didn’t use the money to buy cigarettes or illicit drugs. I bought bits and bobs from Sanrio collection (if you know what I am talking about) or gifts for friends’ birthday or basic cosmetics.
Do I wish it would be different?
At the time obviously, I was annoyed with my mother. Now I wish that she could be more prescriptive on how I treated my money instead of just being vocal without any further explanation. She wasn’t good at money management so I guess she knew what she knew at the time so couldn’t teach me any better.
Fast forward, I am a Qualified Accountant therefore I know much better about money management. I am the bridge between my ancestor and the future generation, so I am keen to teach my son healthy financial habits early.
At 5 years old, he understands money to some extent such as: No money then can’t buy anything. Why does mommy need to go to work to get money so we can buy our necessities? When he was younger when I said to him that I have no money in the shop when he wanted to buy toys and he used to answer me “Just pay with your card then”.
He wasn’t wrong because we are living in the cashless era, and he hardly ever saw hard cash.
Currently, ATMs are disappearing rapidly in Australia. It is a concerning matter because cash is meant to be the King. Well, finally there is a King of our money otherwise cash is still the Queen (*chuckles).
Teaching young children about money is an important part of helping them develop healthy financial habits. At the age of 5, children are just beginning to understand the value of money and how it is used. Coincidentally, we have started to read Barefoot Kids by Scott Pape. Read my other blog Tips on the family budget.
Here are some tips for teaching money concepts to 5-year-olds:
1. Start with the basics.
At this age, it’s important to start with the basics. Introduce coins and notes to your child and teach them how to count money. You can use real coins and bills to help your child learn and play games that involve counting money.
Note to self to take every note cash out from the bank to show what does Australian Dollar look like. We are not using the fake note because this will defeat the purpose of showing to pay in the shop.
2. Make it fun.
Learning about money should be fun and engaging for your child. You can play games like “store” where your child can practice buying and selling items with play money.
We play this game a lot, especially at the playground.
We trade with bartering instead of money as I get ice cream from dry leave tree. Note to self, we could do this better.
3. Use clear jars for saving.
Using clear jars for saving can help your child see their progress and understand the concept of saving. Label each jar with a specific goal, such as “spending,” “saving,” and “giving,” and encourage your child to divide their money accordingly.
We have this jar given by Westpac when I set up his account when he was a few months old.
The teller told us that he was the youngest customer she ever served. His title is Master. (*chuckles).
4. Teach delayed gratification.
Teach your child that sometimes they need to wait to get what they want. For example, if your child wants a toy, encourage them to save their money over time to buy it, rather than buying it immediately.
He is into Avengers Lego currently and he wanted to buy this set that cost $62 after a discount. I told him that I will pay for this toy in advance in return if he completed his job (opening the front door) every day for 13 weeks. He waited for the delivery and commented that they were kind to send it quite early for him. He completed his job for 3 weeks now.
5. Discuss wants vs. needs.
At this age, children can begin to understand the difference between wants and needs. Explain to your child that some things, like food and shelter, are needs, while toys and treats are wants.
Currently, we are at the rate of buying new shoes at least 3-4 pairs a year not for style but for his growing feet. The other day, we went to the shoe store and upon trying many shoes, he said that he wants 2 pairs of casual shoes. I briefly mentioned to him about wanting and needing just to buy 1 pair of casual shoes because I know that we are still going to get soccer shoes and summer sandals.
6. Lead by example.
Children learn by example, so model healthy financial habits for your child. Show them how you save money and make smart financial decisions.
We have started to talk about investment lightly.
I told him that I put aside $20 every month for him so we can buy shares and grow it. He knows about the number so I told him that the $20 can become $100 then $1,000. He was super excited about it. I linked the discussion between want and need. We sell his old toys for cheap also to teach him that he can save money instead of having too many toys.
7. Encourage giving.
Teaching your child about giving back can help instil positive values and a sense of community. Encourage your child to donate a portion of their money to a charity of their choice.
I must admit that I’m struggling with this one because he doesn’t grasp the concept although I donate online to charities and give away unused stuff around the house for free. I must think of a way so he can see it with his eyes.
You can try some of the tips above but remember to keep it simple and age-appropriate for your child. You don’t need to overwhelm them with too much information at once. By introducing basic financial concepts early on, you can help your child develop a positive relationship with money that will serve them well in the future.
To plant a garden is to believe in tomorrow – Audrey Hepburn