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Financial literacy for kids: 5 ways to set your child up for financial success

Singaporeans may have a reputation for penny pinching and bargain hunting, but the truth is that many of us are not very financially fit. Don’t you wish that when you were in school you had some sort of financial literacy for kids class?

As our children grow up in a brave new post-Covid world, we need to instill in them the value of money and how to save for rainy days, and thunderstorms such as this.

After all, picking up good financial habits starts from young. Studies have found that children as young as 3 can already grasp simple financial concepts such as saving and spending. Money habits are formed by age 7.

Here are 5 simple ways to teach kids the essentials about money and set them up for financial success in these uncertain times.

1. Talk about money management to kids

From a young age, start talking about money and where it comes from. Emphasise the link between hard work and money. You need to work to get paid, and if you don’t, you won’t get any money. Money does not just fall out of the sky and into mum and dad’s pockets.

Discuss family financial decisions such as buying a new house or planning for a vacation over the dining table. Talk about your savings, budgets, prices and comparisons.  Explain why purchasing one item over another makes better sense. Junior will begin to understand that everything has a price and how to spend within means.

Older children can be given an actual budget to work with, such as for organising their own birthday party. This gives them the opportunity to make financial decisions on what to include and exclude, and how much to spend on each cost item based on the total amount of funds they have. 

And most importantly, help your child put money matters in perspective by showing them that really matters — the love of a family, having a comfortable home with food on the table, and learning contentment.

2. Discuss wants vs needs

For kids to save, they need help distinguishing their needs and wants.

Explain to them what needs are: everyday necessities such as their meals, household items and clothing. Wants, on the other hand, are items such as toys and gadgets which they can survive without.

The key lesson is this: We should prioritise spending on “needs”, and save up so that we can afford the “wants”.

A good opportunity to begin this exercise is when you are shopping for groceries. Tell them why some items are essential for the week’s meals while others are optional family treats. If they get sidetracked by “wants” such as toys or candy, show them the prices and say that they can purchase it when they have saved up enough money.

Be patient. There may be whining and tantrums at the supermarket but once you have explained to them that a toy is not a “need”, hold steadfast to your decision!

3. Set savings goals

As all parents know, most children have a very short attention span, which can make saving particularly difficult.

It helps to set a savings goal for them so they know exactly what they are saving for. For example, if they are saving up for a new scooter that costs $100, help them break down the cost into bite-sized chunks or milestones, and let them figure out how long it would take to reach that goal based on their savings rate. 

Then, get them a place to stash their cash. For the young ones, clear containers work great as piggy banks so that they can see their money growing. As kids get older and have bigger savings goals, bring them to the bank to open their own savings account. Hand them their very own bank book so that they can track their savings.

One surefire way to motivate them is to offer savings incentives or dollar-for-dollar matching contributions. For example, if your kid is saving up for an expensive new tablet which costs $500, you could offer him a reward of $50 for hitting certain savings milestones. Or, you could match a certain percentage of what he has saved as an added boost.

| See more: How to save money in Singapore |

4. Let them earn their own money

Most parents provide their kids with an allowance. To encourage them to fend for themselves a little, consider giving them a modest amount that’s just enough to get by. Any extra funds for “wants” will have to be earned.

Some parents reward their kids with extra money when they do household chores or score well in examinations. While this method may be effective in the short term, it could prove counterproductive when kids begin expecting rewards for doing things they should’ve been responsible for in the first place.

When left to their own devices and with a little bit of hunger in them, kids can get pretty creative and entrepreneurial. Some may sell arts and crafts, or collectibles to their peers.

You can also encourage your child to help you declutter by picking out old toys and clothes. You can then post them on online marketplaces and let your kids keep the money from the sales.

5. Teach them generosity

You can’t talk about the value of money and saving without touching on charity and giving.

Take your children along when you do charity work, so that they are exposed to the harsh realities of living with barely enough.

You can start off small by participating in meal deliveries to disadvantaged homes and let your child hand over the food packets. Encourage them to help out with either their time or donating a small portion of their savings every month to a charity of their choice.

This will help nurture empathetic individuals, who will appreciate the allowance handed to them, food on the table, and the toys they have at home.


And there you have it! It never hurts to start young. Teach them money concepts from things that are close to their heart: pocket money, buying toys, helping other children. These can go a long way to setting your children up for financial success.

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