Money Talks: Why the ABCs of financial literacy for children is critical

Start young 

The ages three to eight are really important for learning and development. Kids at that age are like vacuum cleaners, they suck up information.

Show them the money

We’ve kept all his (Chinese New Year) money from the last seven years of his life in an envelope. This year … we’ve decided to set up a bank account. We arranged all the notes and made him count (them). We want him to have ownership of this first batch of money. Then I told him that going forward, everything we buy for him will be taken from this bank account. We tell him: “This is how much school costs, this is how much shoes cost.” Very soon, the money disappears. 

Build money awareness, but don’t be overly calculative 

The danger of (accounting for all spending) is that he becomes stingy, and that’s an absolutely horrible attribute to have as a person. It’s a fine line that we need to watch constantly.

Begin with the concept of saving 

After we’ve opened the bank account, down the line in a few months, I want to be able to show (Oliver) the bank statement. I want to show him the amount of money he put in, and how much interest (the money has earned). The interest is a reward for putting money in a bank and building that bit by bit.

Start off with simple investment concepts 

Take some money out, it could be S$1, S$2, S$3, and put it into a jar. Tell your child: “You have the opportunity to earn one time. And if you make the wrong decision, you will lose one time.” With that sort of choice, the child can decide, “Do I make the right decision that will grow the money or make a wrong decision that would lose the money?”

For the full conversation, listen to the Money Talks podcast on teaching children financial literacy.