1. Teach them how to budget
Teaching your children how to budget is vital for developing good spending habits. Start by giving them a regular allowance so that they can have first-hand experience in managing money responsibly.
Introduce them to an easy budgeting rule such as the 50-30-20 rule, which suggests dividing the spending into three categories: 50% on needs, 30% on wants and 20% on savings. To help your children understand these categories, explain that needs are daily expenses like food and transportation; wants are things they wish to have like a new toy, and lastly, savings are money that is reserved for larger goals, like a gaming console or a graduation trip, and for rainy day expenses. By establishing fixed spending categories, it becomes simpler to manage and monitor the expenses. Encourage your children to track and allocate their daily expenses using a checklist that distinguishes between needs, wants, and savings, which will help them learn how to stick to their budget.
Gradually extend the allowance period for children who are getting better at budgeting. For example, you can start giving weekly allowances instead of daily, and then increase to fortnightly as they progress. This gradual transition will teach them about managing finances over longer periods and foster financial responsibility.
2. Teach them about the value of earning an income
Expand your children's financial literacy beyond spending by teaching them about the value of earning an income. Show them how work generates income through various age-appropriate methods like completing chores for an allowance or selling unwanted items. For older kids, consider options such as investing, part-time jobs, and internships during school breaks. By teaching your children about earning money, you not only instil discipline, patience, and creativity in them but also empower them with skills and knowledge that will serve them well throughout their lives.
3. Introduce the concept of wealth accumulation
Opening a savings account for your kids is a good way to introduce them to the concept of wealth accumulation and cultivate a long-term saving habit. Start by exposing them to basic banking concepts like interest. Using relatable examples, such as comparing compound interest to a “power-up” in a game, you can show them how their savings can grow exponentially over time.
Additionally, consider implementing self-made initiatives to expose your children to the benefits of compound interest, such as contributing S$1 for every S$10 they save. For older children, you can even share with them some of the ways you’re accumulating wealth, such as bonds and shares. This could also be a good way to introduce them to the concept of risk and encourage them to make informed financial decisions.
4. Make financial education fun
To make financial education enjoyable, incorporate games like Monopoly, which not only offer a fun-filled family activity but also introduce the concept of investing. Through these games, children can learn the significance of decision-making and understand the consequences of their financial choices in a light-hearted manner. By navigating the virtual world of money, they can acquire practical skills that will prove beneficial in their future financial endeavours.
5. Teach them how to safeguard financial well-being
Introduce the concept of financial safety nets to your children by encouraging them to set aside savings for future needs and emergencies. Take this opportunity to also explain the importance of insurance. Describe insurance as a financial safety net that protects against unexpected expenses. For instance, if your child gets injured during sports, having insurance can help cover the medical fees. A person who falls seriously ill may also turn to insurance payouts to cover daily expenses while they take time to recover. By teaching your children about insurance and its benefits, they can understand the value of preparedness and securing their financial well-being. | 
