By SG Web Reviews (guest contributor)
Recently, I bought an endowment plan after much discussion with my wife. I had purchased it under my name, but the money upon maturation was to be used for our daughter’s university education. Since I am the sole breadwinner, we both agreed that I should be insured; the policy would provide for my daughter’s education fees even if I were to encounter any mishap.
Aside from having a savings plan as a financial safeguard, I have striven to cultivate in my daughter consistency and prudence in managing her finances. Such qualities are crucial in a city like Singapore, where reckless spending comes with dire consequences. To this end, my wife and I firmly believe in the critical role of parents in shaping their child’s financial destiny.
Here are some of my recommendations to help you do the same:
1. Lead by example
It is common knowledge that children learn how to behave by observing their parents — even toddlers as young as 14 months of age are highly adept at reading social cues. It follows that if your financial situation is consistently in bad shape, you are unlikely to hold any sway over your child when you try to educate him/her on financial prudence.
As a parent, remember to walk the talk and lead by example. If you want to inculcate good saving habits in your child, you have to be practicing them yourself. Reduce your debts and monitor your expenses. You will be surprised to find that, over time, your child will pick up good financial habits even without your explicit instruction.
2. Instill the right values
Help your child to distinguish between needs and wants. If your child can grasp the difference, he/she will be able to appreciate the value of money and refrain from spending impulsively. On the other hand, if they happen to spend their money injudiciously, do not bail them out right away. Allow them to experience the consequences instead, so that they will be less likely to repeat their mistakes.
On another note, many Singaporean parents shower their young with expensive electronic gadgets, under the misconception that these would make their children IT-savvy. However, these often constitute more of a “want” than a “need”. It is important, instead, to have more face time with the children — personally I see chess and board games as healthier means of engaging with my daughter.
3. Introduce budgeting
Budgeting is a worthy skill that is not taught in school. However, its simple principles mean that parents can easily teach it to their children. You can start off simply by teaching your child how to allocate weekly expenses for food, stationery supplies and clothes. Monitor your child’s budget for a few months and adjust if necessary.
In addition, let them participate when you are drawing up the monthly household budget with your spouse — he/she can pick up tips by observing your practices. When your child becomes older, start giving allowances on a monthly, rather than weekly basis. This would compel the child to think long-term when budgeting.
4. Respond with rewards
Try to reward your child when he/she accomplishes the tasks you have set. The amount can be as little as $1 so that the child can appreciate the value of exchanging hard work for monetary rewards. Setting achievable tasks and rewarding your child would also encourage them to save diligently. Buy piggy banks for your child to facilitate their saving habit. Over time, you can open a bank account for your child and deposit the accumulated coins. Having their own saving accounts gives children a sense of ownership. Allow them to reward themselves with what they have saved up.
By guest contributor SG Web Reviews, a Singapore blog on business ideas.