In one of my previous blogs, I wrote about how I wished financial education can be made compulsory in school curricula. Well, since that’s not happening anytime soon, I try to introduce it at home with my two boys whenever I feel appropriate. I felt that once a child reaches his teens, he or she is already forming his own opinions of the world and frankly, even if you are ready to teach, they may not want to listen. So, I start them young and doing it through everyday things…
A simple example would be when it’s time to pay the bill after a meal at the restaurant. The boys will get to take turns to tally the amounts on the bill, check if the prices quoted are accurate and to pay with cash we provide them. They are also supposed to check that the change received is accurate. This simple act of handling money teaches them three important things: 1) value of things 2) math or accounting and 3) being comfortable handling money. In the process, I also take the opportunity to explain to them the idea of taxation. Why so? Because GST and service charges appear on some of the bills as well.
As store-value cards become more and more common nowadays, the traditional way of paying by cash lets a child understand that things are not “free”. This, in the long term, may go some way in deterring him from using credit cards recklessly. Also, by knowing how much say, a McDonald’s meal costs, my sons are able to place relative values to the items they potentially want to buy. This is shown through remarks like, “Oh, that’s cheaper than a Mac’s meal” or “What! I could buy 5 Mac’s meals with that amount of money!” Yep, by now, it’s quite obvious my boys are that into junk-food McDonald’s meals, which incidentally, I do try and limit only to special occasions.
Another area which I tried out was through the recording of their pocket money. We set up a simple spreadsheet with columns for “Date”, “Amount”, “In”, “Out” and “Balance”. As their banker, I told them I would let them earn interest but only if they do not spend their pocket money except on lunch. It’s rather difficult because there is peer pressure from classmates who would buy ice cream or iced tea in school. Of course, kids being kids, I had to explain to them a few times about how to go about their recording, They had to learn to delay their gratification to earn interest or use the money for something in the short term and forego the extra money. It’s a decision they have to make through their lives and starting young may be good.
As they grew older, I began to introduce more complicated concepts. During one of their long summer holidays, I announced that I was going to teach them a new subject which they had never learnt before: “Financial Education”. I started out by showing them our family “Net Worth” and “Expenses” spreadsheets which I update on a monthly basis. It opened their eyes to many things, e.g. that everything, including the gas, electricity, water, right down to the parking lot – things which were so-called “invisible” to them, came with a price tag. For a while, the two were feeling a bit concerned that we couldn’t possibly afford all these. I assured them we were doing fine. This was the perfect time to introduce the concepts of “Income” and “Expenses”.
I explained to them the concepts of “Sources” of income, including “Passive” and “Active” income sources, as well as how to differentiate between “Fixed” and “Variable” expenses. It took them a while to understand but eventually, I think they did. I realized that in teaching them, I had to regularly use examples they can relate to and keep things “visual” and interactive. For example, I would draw charts or point out things in the house and asked them which category of expense that item would fall into. Nowadays, when they see me updating my expenses or net worth, they would often come and take a look, curious to find out how we were doing for the month.
I realized I also needed them to understand how to “earn” their own money. The boys were very keen on paper-folding all sorts of insects, airplanes and dragons. So, during one of the barbeque gatherings in our neighbourhood in China, we decided to set up our own “Origami paper gifts” stall. I sourced for the right origami paper. They had to fold their “products”, price them and construct a money-collection box. Business was surprisingly good.
During the event, my older boy was an avid marketer but the younger one was quite busy enjoying the bbq, although he did round up some friends to buy the products. It was pretty hard work but they enjoyed counting their “profits” at the end of the day. Being their typical financially-crazy mom, I insisted that they draft a simple Income and Expense Statement. They were even “taxed” by their father and me. It was all in good fun but from this exercise, they learnt first hand the tears and joys of setting up shop.
But not everything should be money and money only. Charity – something which I wished I could credit with teaching my boys, but this, my boys taught me instead. Having moved back here to Singapore, my two boys had on separate occasions, asked if they could donate money. It wasn’t a lot but I was surprised because they had never asked this before. Apparently, there were a visually-handicapped musician and an old man peddling tissue papers near where we are staying and my boys really felt like helping them. I would like to think that showing them how things work in real life had taught them to realize that there are people who, through no fault of theirs, can barely make ends meet but are still trying their best to earn some income.
The journey of financial education, I suppose, is never-ending. Nonetheless, I would count this small but kind act of them as a significant milestone.
Category: Financial Planning, Cash Flow | No comments yet