One good way to engage your kids in such unusual times now, is to educate them about personal finance. If you need to do so with your kids, this is the article for you, with tips grouped according to different ages.
4-6 years old: Introduce them to the concept of money and how money is utilised
Visual illustration – show them the various forms of money such as notes and coins.
Explain to them how they must pay to get the things they need/want.
7-10 years old: Educate them about earning and saving money in primary school
Teach them how earning money works.
Paying them when they complete a housework – they will learn that they have to work for money.
Or prepare a chart with the chores and the corresponding amounts they earn from doing the various chores.
This is the phase where they can understand the value of money and cultivate the skills to plan forward.
How to teach savings – encourage them to set aside some money until they have enough to get what they want, instead of spending it all at once.
11-14 years old: Open their bank account
Since they have acquired sufficient funds and knowledge on savings, it is time to set up an account for them.
Open an account with no penalties for low balances.
After opening the account:
- Teach them how to check balances with the use of banking apps.
- How to use these apps for payments and fund transfers.
- Warn them on the risks of overspending which will lead to overdraft fees.
- How their money will multiply with interest.
15-18 years old: Budgeting and loaning in high school
Prepare them for the real world.
Teach them how to do budgeting by:
- Predicting and computing how much they will earn.
- Find out what their usual monthly expenses comprise, such as food, entertainment etc. (this can be done by analysing their bank statements).
- Saving part of what they earn.
Teach them about borrowing money:
- How interest will be charged when they borrow money.
- Credit scores & how credit scores can affect their credibility and hence the amount of interest they are subjected to.
- Warn them on the risks of carrying balance on a credit card – a possible way is to let them be the authorised user of your card so that they have a sense of its function.
Child in tertiary education
Ensure that they have already drafted out their budget and they have the capacity to pay off expenditures, whereby at most 50% of their budget will be set aside for expenses.
Ensure that they have an emergency fund – 3 to 6 months of expenses may not be saved yet, but they should have kept $500 to $1000 minimally for unforeseeable circumstances that require the extra money.
Child graduated and fresh in the workforce
Advise them of the following:
Get a credit card of their own to strengthen their credibility.
Save for their retirement early – starting early can speed up the growth of their retirement funds.
Get insurance coverage to protect their income as well as pay for unforeseen medical bills.