What is the ideal age to start teaching our children about money? If you are thinking primary school, think again. New research from the University of Cambridge (commissioned by the United Kingdom’s Money Advice Service) revealed that children's money habits are formed by age seven.
By age seven, the study says most children will be able to “recognize the value of money” and “understand that money can be exchanged for goods, as well as what it means to earn money and what income is.” They are also capable of complex functions such as “planning ahead, delaying a decision until later and understanding that some choices are irreversible.”
Personally, I have a fuzzy memory of what my money habits were when I was 6 years old. The only vivid recollection I have was I tried to save whatever Chinese New Year and Birthday angpow money I had, which I had partly this to thank.
If you grew up in the eighties or nineties, you will have no problem recognizing Smiley Squirrel, the savings mascot from POSB. The animal, known for its habit of storing food for rainy days, was chosen as a model to inspire children to save. And saved I did!
I poured my annual angpow collection into the coin bank - yes, notes included - and coveted my parents' loose change almost every single day. All in a bid to fill up my coin bank in lightning speed, and drag my parents to POSB to deposit my fortune. And my, I remembered going to the bank was a mini adventure itself. Because nothing beats the high feeling that I get on seeing the figures rise in my POSBkids account book!
Fast forward to present, and I am reliving the exact same experience through my monkies. They too, have a POSBkids Account each and seemed to have inherited the habit of saving every penny that they receive every time. Erm, unless they chance upon a LEGO set that they love.
And that is where the dilemma kicks in. Do I spend my money now, or wait until there is a sale, or just forget about it? All very legitimate choices, but tough to pick one all the same. With money habits in kids set by age seven, there are the everyday teachable money moments that I see the potential in inculcating money management skills to the monkies.
Here are some suggestions on how to impart a few good financial lessons, at every age group until they hit Secondary School:
Ages three to five: Money lessons at this age set the tone for later on. Introduce the concept of delayed gratification, where the kids may have to wait and save up in order to buy something they want. Parents can do this by setting a savings goal to buy a toy. Ensure that it is not something that is too expensive, else it will take forever to save! A one-month timeline to save is reasonable enough. Also, when they are queuing up for something, take the opportunity to emphasize the importance learning to wait before getting what they want.
Ages six to eight: At this age, kids should understand that money is finite, and that if they spend it, it is gone. This means they have to learn how to make choices about how to spend money, because once it is spent they do not get the chance to choose again. Try including them in some financial decisions, like working within a budget by passing them $5 at the supermarket and have them choose the type of fruits to buy. Consider giving them a small allowance weekly too, and increase the list of things that they now need to pay for out of that allowance - things like lollipops and small toys.
Ages nine to eleven: By now, kids should realise the value of money. Show them how unit pricing works at the supermarket - the supermarket is a fantastic place to teach money lessons by the way! - by explaining the same products, like milk, are sold under different brands and at different prices too. Have them pick out the one that offers more value for money or better yet, spot the sale items! Talk about bulk deals so as to get a cheaper per-item price.
Ages eleven to thirteen: It is time to shift from the idea of saving for short-term goals to long-term goals by introducing the concept of compound interest. At this age, kids usually want to buy a million things so it will be good to make them work for their money too! Give them a few jobs that you might otherwise pay someone else to do, like washing the car or toilet, and the money they earned will hold a far greater value and make them more reluctant to spend it.
Until they start earning a living themselves, children have a tendency to view - and spend - money like it grows on trees. So Smiley Squirrel's mantra of "It is never too early to start saving-a little a day, goes a long way." is a necessary value that is best inculcated from young, be it during my growing up years or the monkies' current generation.
Do you have suggestions to encourage our kids to save more? Take part in POSB's savings survey to share your views and stand a chance to win S$50 NTUC vouchers! Visit HERE to participate.