A few days ago, when my 13 years old niece announced us that she wants to get “Samsung Galaxy Note 2” for her 14th birthday, I didn’t know what to say and how to react. I, such a stingy aunt according to her description, could only say “What????!!!”.
The phone is currently on the market about $750-$850 and I thought It is simply too expensive for the fourteen years old kid that I can’t even think about buying one for myself. I needed to calm myself down and asked her again if she really wants to get the expensive phone and these were her answers.
Firstly, many of her class mates have already had the phone so she doesn’t consider the phone is not unacceptably expensive. Secondly, she has her saving of $300 so she can contribute the money (by spending all her savings) and we, 2 aunties and an uncle can easily top up the rest for her. Her argument seemed to be very reasonable to her but not to me who has to go to work for living and never received such an expensive present as a kid. I know it is not a too big deal for us to top-up the money for our lovely niece so she can have what she really wants to have but I still can’t get rid of a question mark on the kid’s idea about Finance.
Any unclear reasons (to me), we do not like talking about money even though we cannot simply survive without it. Somehow we think that it is not noble to talk about money so we treated it as a taboo topic to discuss. Especially, talking about money with children as an adult seems to be acknowledged as an unreasonable behaviour. I truly do not know the reason. I still remember that a children psychiatrist mentioned during her radio program that we should avoid talking about financial difficulties or unfavourable financial situations with kids as they could get emotionally hurt. I nodded my head after her comments but I was not 100 percent convinced by her idea. Why shouldn’t we talk about money or finance with kids? I agree her idea that parents shouldn’t pass on their financial burden to children so they can get mentally shaken or depressed but I don’t agree that children should be kept away from finance and financial matters. I believe that our children need to know or be shared the reality moderately. How to manage their finance properly in their young age is a very important thing to know and learn for their future life. I have met and heard about many young people who are living on pay check to pay check and struggling with their finance. Some of them are deeply in debts when they are only early 20’s. They seem to know how to make money and spend them but don’t seem to know how to save and manage the money. I strongly believe that early financial education will help our children to manage their finance better which will lead them to the better/safer future.
I do acknowledge that it is not easy to educate children about finance as they would step back only with the terminology, ‘Finance’, but remember that we can’t not survive without knowing how to manage the money in this society so we have got to teach them the basic rules on how to manage their money. These rules should be adopted not only by children also by many adults who didn’t learn properly when they were young.
1. Keep away from Credit cards : This is very simple. Educate them If they have money, they can spend but if they don’t, they can’t. They must not think that money borrowed from banks or somewhere else is theirs. The money is NOT theirs and they need to pay back with very high interest (over 20%) on the top of what they actually borrowed, and this will eventually drag them into the hell of debts. Many young people are struggling every single day to pay off their credit card debts and some of them sadly choose to end up their life as they cannot find any other way to pay off the debts. It is extremely important to teach them how dangerous it could be if they can’t control their spending habit on credit cards.
2. Develop saving habit : Nowadays many young people start learning money while they are studying. When they start working and earning money is the best time to develop health saving habit. Advise them to save up at least 20% of their earnings. Allow themselves to award their efforts by buying things they wanted to have but teach them certain part of their earning needs to be saved for future. We can’t live on pay cheque to pay cheque. Financial stability can be one of key factors for our secure life. If they can learn saving habit on their young age, their financial situation will be far more stable than any others who missed the education.
3. Identify the limit : Fortunately, current society allow parents to provide more and better things to our children and parents are willing to supply as many thing as possible and as good/expensive things as possible to their children. I don’t want to blame the intention and love of the parents but over generosity and love can confuse our kids with their financial boundary. Unfortunately, they can’t have all they want. Teach them what they can have and what they can’t have. They need to know/learn what is their limit as we all had to face the reality one day. Identifying their limit will teach them how to accept reality and manage their finance better in a long term.
4. Keep a record book : This is very personal but it helped me a lot to realise the value of money when I was a kid. The notebook was given by a teacher and I used it for recording my expenses and incomes. Whenever I was given some money from parents or relatives, I wrote down the amount at the right side(credit) on the notebook and all the small purchases such as lollies, cookies, pens, etc... were sitting at the left side(debit). The credit amount was deducted whenever I made a purchase and I knew how much money I spent and how much money left. The practice taught me about when to stop buying, what I could afford to buy and how to manage my little money. So I highly recommend this exercise to children.
5. Have own bank account and let them involve it: Open their own bank account and let them manage their bank accounts. I have noticed that many parents open bank accounts for their children and save up for their future but the children hardly ever involve themselves into the process of saving or managing the accounts. Allow them to feel the pleasure of saving and the growth of money. Teach them how to save in order to get the goal amount. Having an ownership on their money will teach them to be responsible for their spending.
6. Learn a simple life: We all want to have more things and better things. There are plenty of things we wish to buy but very often having too many things can be a burden of life. Teach kids a simple living. Show them that we do not need to have many things to make ourselves happy. As their life is fully exposed to the commercial advertisement on a daily base, they would more likely to be grown up as excessive consumers. Learning how to live simply in the early age will help them to keep away from a financial hardship when they are grown up.
7. Learn affordability: Teach them what is ‘affordability’. Sometimes it can be unpleasant to know what we can actually afford to buy or have but it is far better to know our financial situation and control our spending than putting ourselves into a financial swamp by ignoring our affordability.
8. Learn how to buy cheap: Many people around me buy things without enough research or comparison. According to our experience on property market, we made profit on buying not selling. We bought properties cheaper so we could make profit when we sold them. Teach them the value of money and how to buy same thing cheaper by proper research and comparison. My husband just purchased his phone (Samsung Galaxy Note 2) for his birthday through his extensive on-line search and paid $570 and I found the same phone in a second hand shop for $745. Why would you pay $745 for a second hand phone when you can buy a new one for $570? It sounds dull but surprisingly many people pay more money for the same stuff without knowing. Be diligent and spend money wisely.
9. Set a financial goal: Too early to have a financial goal? There is no too early time to have a goal. Let them set up a goal to achieve. For example, $200 for a year can be not too hard goal to achieve for even little kids nowadays. When they have their own goal, it will motivate them to progress and control their journey towards to the goal. Acquiring good habits in their early age can be a priceless advantage for their future.
10. Let them contribute to their purchase: This is from my husband’s advice. When he was young, his mother normally paid part of the total price of stuff that he wanted have and asked him to top-up the rest. Therefore, he had to save up the rest and when he finally got the stuff, it was more valuable to him than things were given. Allow the kids to feel the value of things which they had to put their efforts.
One of my favourite Chinese proverbs is “The habits learned when you were 3 will be with you till when you are 80” and I couldn’t agree more. Having proper financial education can be a valuable asset in your life and for your future.
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