Helping children develop the essential skills they’ll need to succeed later in life is an important parental responsibility, just as much as providing basic needs like food, shelter and clothing. One of the most pivotal of these life skills by far is financial literacy. The immense importance and sensitive nature of personal finances means that as a parent, you’ll want to be your child’s primary go-to for learning about money management matters like saving, budgeting and evaluating purchases.
Enhancing your children’s financial literacy becomes especially important when they hit their teenage years. As they experience major life changes, take on more responsibilities and navigate ways to exercise their independence, your teen will need a guiding hand more than ever. The following five tips, in particular, can help you instill some essential money smarts in your teen that will serve them well throughout their life in Singapore and beyond:
Discuss Money Frankly at Every Opportunity
Though some people in Singapore frown upon the idea of discussing money openly, the truth is that many real-life situations offer productive opportunities for your teen to learn about financial responsibility. A trip to the bank, for instance, can lead to productive discussions about how credit and loans work and the situations in which these can be useful. You might even look up a financial calculator online, like those provided by Singapore government agencies, to help teach your child the basics of computing interest and other essential business calculations.
Even the most seemingly mundane activities like grocery shopping and paying bills are chances to chat with your teen about money matters like maintaining a budget, comparing prices, and managing recurring expenses. These are concerns that your teen will have to deal with regularly when they reach adulthood and begin living on their own. Hence, the sooner they learn to see financial management as an ordinary, albeit important, component of everyday life, the better.
Put Them in Charge of Their Own Money
Teenagers love the idea of being independent, but they also need to learn that the substantial freedoms they enjoy also come with attached responsibilities. Give your child a certain amount of pocket money per month and let them figure out how to portion it out for food, clothes and other daily needs. Knowing that they’re in charge of making their funds last over a set period of time gives them a taste of what it means to live within a budget and helps curb impulse-buying.
Encouraging your teen to save up for things they really want is one of the most fail-safe ways to teach them financial responsibility. The next time they express interest in a new book, a video game, a pair of shoes or anything else, don’t buy the item for them. Instead, help them set realistic savings targets that will eventually enable them to purchase the item on their own.
Help Them Set Up a Bank Account
The teenage years are the perfect time to set your child up with a bank account of their own. A basic savings account is a good place to start, but you may also want to open a checking count where your teen can keep any money they intend to use for daily expenses. Keeping these two separate accounts can help prevent your teen from accidentally or impulsively spending any funds they’d like to set aside for the long term.
If you’d like to be able to supervise your teen’s bank account while still allowing them a significant measure of independence, consider putting yourself down as a joint account holder. This allows you to monitor the account but will also let your child continue managing the money in it on their own.
Draw Up a Budget or Spending Plan
Living on a budget can teach your teen good financial habits like anticipating expenses, making intelligent spending choices, reducing impulse purchases and meeting savings goals. Urge your teen to set aside a certain amount of pocket money for savings every month or every few months. Do also encourage them to determine a regular budget for food, clothes, entertainment and other necessities, as this will give them a better sense of their financial situation and spending habits as a whole.
As your teen learns how to budget, you’ll have ample opportunities to teach them other essential related skills like making realistic projections, tracking expenses and calculating tax. If you use any budgeting tools like financial apps, spreadsheets, or even paper notebooks to track your own expenses, introduce these to your child and encourage them to try them out.
Cultivate a Price-Conscious Mindset
If you want your child to learn the value of money and spend wisely, it’s a good idea to talk with them frequently about prices, opportunity cost, and the importance of doing thorough product research. If your child expresses interest in a designer item worth hundreds of dollars, for example, invite them to consider that price in relation to the number of work hours it would take to earn that amount. You can also have them think about what else they might be able to buy for that same price.
Whenever you show your children practical ways to manage their money, you help them develop positive financial habits, as well as overall healthier attitudes toward spending and saving. Nurturing and practicing these attitudes over time will, in turn, help them grow into more responsible and successful adults.