How To Teach Your Children Financial Literacy

This post was originally posted on Planner Bee.

Have you ever had conversations with your children about money that have left you bewildered? Perhaps their cavalier attitude to money has left you wondering how you can teach them the concept of money.

Financial literacy is something that we can start inculcating from a young age, and should not be seen as a subject meant for adulthood only.

By introducing the concept and value of money early, we are equipping our children and the next generation with the essential tools to manage money wisely.

What is financial literacy?

Being financial literate refers to having the ability to understand and use financial skills such as saving, investing and budgeting. Ultimately, someone who is financially literate has good control over their finances and would make informed decisions surrounding money.

Why is it important to start young?

As with many skills in life, the earlier we start picking it up, the more opportunities we have to practise and gain experience exercising the relevant muscles. The Early Childhood Development Agency (ECDA) recognises the significance of starting early with financial literacy education and how it has an important impact on our children and their views on money and finances.

With inflation and the rising cost of living, our children may have a tougher time coping unless they are armed with skills to make wise spending choices from a young age.

Let’s have a look at how we can support our children in this journey according to their age group.

For toddlers and preschoolers

Financial concepts may be abstract for very young children to grasp, so parents will need to be creative in making it relatable while introducing the concept of money. Here are some suggestions on how you can get started if you have toddlers at home:

1. Make it fun

Pretend play is a great way to introduce the concept of money to young children. Pretend play is beneficial for their development in many ways, including for social and emotional development, where they learn more about themselves and the world around them.

You can start by encouraging pretend play at home. Think playing the role of the cashier or customer in an imaginary convenience store shopping trip, or pretending to dine out, complete with ordering and payment.

To introduce the concept of money, you can also play simple board games with your children that involve game money. An accessible classic would be Monopoly Junior. Reading is another great way to spend time together meaningfully. Here are a few titles to get started:

• The Moneybunny Series by Cinders Mcleod (Earn It!, Spend It!, Save It!, Give It!)
• Little Critter: Just Saving My Money by Mercer Mayer

2. Involve them

Children love supermarket trips. Bring them along for your weekly grocery runs, let them order drinks for you at the coffeeshop and let them handle payment.

Many of us are guilty of relying heavily on cashless payment options now, but it may be a good time to bring some cash along and let your children try handling cash. Not only does it give them an opportunity to interact with the real world, it also builds their confidence and social skills.

3. Start a piggy bank

This would require you to explain the concept of saving up for something. You can start with a discussion with your children about the occasions during which they would receive money gifts, and how saving helps them achieve a specific goal.

Perhaps it is a toy that they have wanted for a long time, or an experience that they have been wanting to go for. Set a goal together with your child and make it tangible for them via a visual chart or a jar as they progress towards it.

4. Practise delayed gratification

Do you avoid walking past toy stores because your child has the tendency to grab a few toys and insist on going home with them, or a meltdown may ensue? It may be a good time to introduce and practise delayed gratification.

A study done in April 2024 on the impact of delayed gratification on young Singaporean children revealed that those who are more receptive to delayed gratification are more likely to have better working memory and self-control. This translates to greater academic success and a healthier state of well-being later in life.

Together with your child, take a photo of the item that they want badly and save it in an album on your phone dedicated to all their wants. When a special occasion is nearing, you may get your child to pick an item from the album as a gift.

You may be surprised that by then, your child may have even forgotten about many of the items or has lost interest and has new wants instead.

For children in primary school

Primary school going children will now have the responsibility of handling pocket money during lunch breaks or trips to the school bookshop. At this point, it will be advisable to build on the basics and discuss budgeting and developing healthy spending habits.

1. Introduce the concept of budgeting

Family budgeting activities go a long way in helping children understand that monetary resources are not infinite and have to be managed with care and planning.

Consider holding a weekly family meeting about spending budgets, or help them create a plan for their allowance. If they are given $10 a week, discuss how they may choose to spend it and save it.

2. Differentiating between wants and needs

Sometimes, our children may be tempted to buy knick knacks or non-essential stationery items from the school bookshop.

Discuss their intentions behind these decisions and how their decision will have an impact on their day-to-day life (not having enough money at the end of the week for food, not being able to save up for something that they had wanted). Teaching them to understand and differentiate between wants and needs can foster mindful spending habits and minimise impulse purchases.

A book that you can use to support your conversation with younger primary school going children is Lily Learns about Wants and Needs by Lisa Bullard. There are read-aloud videos on YouTube so you can watch it first before sharing the story with your child.

3. Explain how banking works

Your child probably has a bank account by now, so consider showing them how banks work. Explain how deposits work and how banks can keep their money safe and even add a little extra money in the form of interest over time.

This introduces the concept of accrued interest and reinforces the benefits of saving.

4. Let them ‘work’ for more allowance

At this age, you can start giving your child some age-appropriate jobs for extra allowance. Some tasks can include teaching a younger sibling how to read, or helping with simple chores.

This can teach them to appreciate the value of responsibility, work and effort.

For tweens and teens

With more experience with money under their belt, exposure to peer pressure and temptations will inevitably increase. Here are some ways to engage older children and guide them through challenges they may face:

1. Understanding how marketing and peers influence spending habits

With constant exposure to various forms of media, teenagers have a higher tendency to give into temptations to buy products endorsed by their favourite celebrities, considering it a ‘need’ to own the merchandise or follow the latest fad.

This is an opportune moment to talk about how marketing and social media can influence their spending habits and remind them that resources are finite.

Encourage and guide them to be more discerning when looking at advertisements and trends, and make decisions independent of surrounding pressure.

2. Tracking expenses

Tracking expenses gives us awareness of where our money is going and helps us spot spending patterns. Consequently, visual representation of where our money is coming in from and going can help us stay within budget and reach financial goals more effectively.

Teenagers can start tracking their expenses and one simple way to do this is to use a journal or to use a free expense tracker app.

3. Not too old for games

You can still enjoy game nights with your teenage child. There are several locally designed and developed games involving relatable topics such as insurance, investment and cryptocurrency that you can check out here.

Be a role model, lead by example

Children learn through observation and they look up to us more than we know. You can be sure that our attitudes towards finance, and what we do with our money will have a profound influence on our children. If you have older children, it is also a good idea to share your past experiences of making both good and unfavourable financial decisions and the lessons you have learned from them.

Need more ideas? Did you know that Institute for Financial Literacy, a collaboration between MoneySense and Singapore Polytechnic International, offers free and unbiased programmes for the public on various needs and stages of life? There are activity and learning kits for your children from ages 3 to 16, or you may find helpful information for yourself before making investments or when planning for retirement here.

Having open conversations about money while being careful not to unload all our troubles onto our children can help create a safe space for them to ask questions and learn. With the right tools and a solid foundation, they can be empowered to make more informed decisions, develop responsible spending and saving habits and understand the value of money.

Read more: How To Engage Kids on Money Topics