Financial planners often hear clients exclaiming, “I wish I knew this earlier! If only this was taught in school”.

As a parent today, why not teach your children how to be smart with money in the “school” you call home.

Undeniably, each child’s attitude towards money is influenced by their parents, peers, as well as the media. If their foundation is strong, they will be better able to rationalise their money decisions and become more financially savvy later in life.

Here are six lesson you can teach our kids on good money management.

1. Start your kids young

Parents can teach their kids from as early as three years old about basic transactions.

Kids at this young age learn through observations so for a start, parents can teach the concept of money by exchanging it for food or toys, which is likely to be their primary interest at such an age.

2. Value of money

Kids are never too young to learn about spending, saving, and making small but wise money choices.

For instance, give your kids the chance to pay for purchases at the cashier, with you supervising them. Be ready to assist but only if they need help in order to build up their confidence.

You can start by making this a roleplaying game at home first if your child is too anxious about it.

Start with a small fixed allowance and teach them to understand how the price of an item relates to how much it will reduce their cash in hand.

Help them understand options by providing substitutes if an item is over their budget.

You can also demonstrate to them how accumulating their leftovers (savings!) can lead to having enough to buy something more expensive later.

3. Include kids in conversations about money

When the kids are in their tween and teenage years, do include them in conversations about money. This will send the message that it is safe to talk about money issues with family members.

You may ask their opinions and discuss the advantages and disadvantages, repercussions, and rationalisation in, for example, buying a family car, a television set, a handphone etc.

Do discuss with them their aspirations for college and the cost it will entail.

In this way, your children will feel a sense of involvement and responsibility regarding the family’s money issues and can observe the consequences of their opinions.

As a result, they will have more understanding and familiarity on how money works and how better to manage debts.

4. Teach them the three-jar system

One of the ways to inculcate a healthy mindset is to set-up jars i.e. 70% for spending, 20% for savings and 10% for charity or donation.

At the end of the month or every quarter, count the money with your children and record the numbers.

Review the numbers with your children and encourage them to either deposit it in the bank, or donate it to a charity of their choice.

Consequently, you are teaching the kids about sharing with the less fortunate, saving for their future, and carefully spending on what they need and want.

5. Sometimes things go wrong…

Kids should know that sometimes, things don’t work out in their favour. As a parent, share with them your money difficulties and gain their understanding on the compromises that need to be made.

During uncertain times when the economy is not good, many people will face pay-cuts, unpaid salaries and worse, retrenchment.

Thus, it is best to identify the expenses that can be dropped temporarily, for example, extra classes like piano, art, taekwondo swimming etc.

Do involve the kids in these discussions as it will affect them, physically and mentally. Explain to them the things that need to be prioritised for the time being.

6. Be a good example

Talk about money from a positive perspective i.e. money as a tool that can help you achieve what you desire – education in a university of your choice, living comfortably with peace of mind.

Approach debt-management objectively and avoid blaming each other. Demonstrate what it means to spend within your means – what it entails and how to make it work.

Children learn about money from observing you. Thus, parents must talk the right money language, have the right money attitude and display the right skills.

Conclusion

Kids taught good money management skills will have a better chance to make sound financial decisions as adults. They will be better prepared to face any challenges in the future.

As parents, you should openly discuss your financial mistakes with your kids so they do not do the same.

This article first appeared in MyPF. Follow MyPF to simplify and grow your personal finances on Facebook and Instagram.