Give Your Kids the Gift of Financial Literacy this Christmas
We’re quickly approaching the holiday season, typically associated with the act of gift giving – and the pressure to stretch your wallet a little further to make the season extra special. But did you know that one of the best gifts you can give your children this year comes at no cost other than your time and energy?
That’s right: one of the best gifts you can give your children this year is the gift of financial literacy. By helping your children to understand how money works through the five key components, they will be able to make smart decisions that will prepare them for adulthood and beyond. Here are the five pieces of wisdom you can impart on your little ones this holiday season.
Earn: Understanding a Paycheck (Straits Times 2015)
An easy way for children to comprehend the idea of a paycheck is by allowing them to earn money in the form of an allowance. As they accomplish tasks around the house and help neighbors or family members with projects, set aside an amount of money to award them for their hard work. It doesn’t even need to be a significant amount – but it is the crucial first step to helping them understand financial responsibility.
Spend: Creating a Budget (AsiaOne 2020)
Show your children that budgeting can be simple and fun by practicing an exercise that allows your child to host a party for their friends. Ask them to plan the activities, purchase items, and select snacks to be served at the event. Guide them during the planning and preparing process, taken them shopping, and help them to find the right things to fit within the allotted budget. This type of exercise will make the concept of budgeting much easier to understand and build on in later years!
Save: Determining Goals (SingSaver 2018)
Children are often motivated by being encouraged, especially after accomplishing a larger feat. Set up a reward system in your home where your children have the freedom to make financial decisions with that allowance money but are encouraged to save each week for something of greater value. When your child is near his or her goal, match their savings with the remaining amount needed as a way to reward them for their hard work with saving!
Borrow: Understanding Debt (Value Champion 2018)
Spending less than you can afford is always a safe option, as it helps you to avoid needing to borrow from a high-interest lender as an adult. If your child needs something that they can’t currently afford, offer to loan them the remainder – but remind them that they will need to pay you back, and give you an extra percentage of their allowance going forward until the debt is repaid. This will help cement the idea of avoiding high interest debt in the future!
Protect: Preventing Fraud (MoneySmart 2019)
Protecting your finances at all times is a crucial part of financial literacy. Explain real-life situations where people have lost money due to fraud or other financial security lapses. Then, take your child to a trusted banking institution and help them to set up their very own savings account.
You don’t need to break the bank this holiday season – rather, take the next few months to begin instilling financial concepts into your children’s minds and help them to become more independent and make educated choices with their money as they grow older. This is a priceless gift to start giving, at any age!
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