Here’s my personal story on how I realize the importance of THIS. I came from an average family and since young, my father would give us allowance only when we asked for it.
As excited as I received the money, I would spent my money on snacks and other “luxuries” that I could afford such as note books, craft papers, key chains and many more.
As I grew up, this evil cycle repeated with different desires and wants. Then, the reality hit me hard once I started working and having other commitment such as car loans and saving plans. Only then, at the age of 24, I realized what I need the most is not money, but how I can manage my money.
Yes, you are right. THIS is financial literacy.
As you might think that financial literacy is all about saving money, it actually means more that. Financial literacy includes the understanding and application of several financial skills such as budgeting, expense tracking, effective debt payment and investment.
In today’s post, you will understand the urgent needs to equip your children with financial literacy and efficient ways to help your children to develop their financial literacy. As we are concerned, we hope to help these tips will equally help you to improve your financial management. Here is more financial advice from the expert you might need to overcome the uncertain period caused by the COVID-19 pandemic.
Here’s Why Your Children Need Financial Literacy Now
You might be shocked to know this fact but it is in fact a real scenario in Malaysia. Based on the survey by Credit Counselling and Debt Management Agency (AKPK) in 2019, 20% of the Malaysians were unable to have savings for the past 6 months. 33% of the Malaysians need to borrow money for expenses on necessities. To make the situation worse, 50% of the Malaysians faced difficulties to take RM 1000 for any emergency or urgent situations.
So ask yourself this question: Do you wish your children to be one of these Malaysians who suffer from financial stress? If your answer is NO, you can help your children to build a better financial future by guiding them through the following ways.
4 Effective Ways You Desperately Need To Develop Your Children’s Financial Literacy
1) Cultivate “save before spend” habit
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Image credits to Micheile Henderson in Unsplash
Here’s the question: do we spend or save first? If you think that you can spend first and then save the remaining, you are on the wrong track. You need to set your children now on the right track by telling them to first save then spend.
If you wish to learn how to manage RM 10000, you must first learn how to manage RM 100. If you wish to learn how to manage RM 100, you must first learn how to manage RM 10. So, get your children to start from a small amount is in fact the wisest choice.
For instance, when you give your children RM 10, you should first get you children to save 5-10% of the allowance. In this context, you children will learn to save RM 0.50-RM 1.
You might think the amount is too minute to save, but what we wish for your children is to cultivate the concept that savings should come first before spending. When this habit persists, your children will eventually and automatically save at least 10% of their salary when they are into the work field.
2) Make budget recording a fun and creative task
Image credits to Pixabay
As mentioned before, saving alone will not get your children to be financially literate. They need to be aware of where they spend their money daily, monthly and annually. As recording daily expenses might sound tedious and troublesome, you can make this activity a fun and creative one.
To start off, you can get your children to pick their favourite notebooks and stickers. Your children can also use colour pencils or pens in recording their daily expenses.
For elder children, you can introduce them some categories in expenses such as food and living expenses and entertainment. Be willing to compliment your children when they show you their hard work in recording their daily expenses.
By the end of each month, you should have follow-up activity with your children where both of you analyse whether the expenses are necessary or redundant. The follow-up activity would then bring us to the next important lesson you need to educate your children on needs and wants.
3) Discuss about needs, wants and financial goals
Image credits to Pixabay
Even as an adult, I believe you have the experience of buying things out of impulse. What you often experience is that instant excitement and pleasure. However, the excitement and pleasure is not long-lasting. This is why a lot of us fall into the trap of impulsive buying or revenge buying- to keep chasing the next high. Therefore, it is important to educate your children to recognize the needs and wants in their lives.
By reflecting on their previous spending, they will know whether they have made unnecessary expenses and they will learn to make the correct choices during their following expenses.
4) Use games, competitions and rewards to bring excitement
Image credits to Pixabay
As recommended by many millionaires around the globe, the Monopoly is one of the best games to develop financial literacy. In the Monopoly game, you become rich by buying different properties such as houses, hotels and stations and getting rents from other players.
As your children play the game, they will learn that they need a variety of income sources to become richer. Putting this into their real life in the future, they will learn the importance of side hustles and investment to accumulate wealth.
Besides games, children are constantly motivated with competitions and rewards. As parents, you can have siblings match among your children. You can select a winner monthly and also yearly on those who saves the most money or spend the least on wants.
An even better idea would be to reward any of your children who reach the target saving of the year. With this, your children will certainly be more encouraged to manage their money and gradually develop their financial literacy. You can reward your children with monetary reward and in any other form that you and your children agree upon before starting the competition.
Set Your Children Off A Good Start
As little as these steps might seem to be, both you and your children will be able to make better choices each day on managing your money if you keep practising these tips until it becomes a habit. You can make a huge difference in your children’s lives if you start educating them on financial literacy NOW.
Don’t buy your children what you did not have during your childhood, instead teach them what you were not taught during your childhood.
Stay tuned with Motherhood Story to get more useful information and tips for you and your family.