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Teaching children to save

For many families, it seems like it should be easy for children to learn about savings and money management. Have your child open an account and put money into it.

For many families, it seems like it should be easy for children to learn about savings and money management. Have your child open an account and put money into it.

The reality, though, is that it takes more than a bank account for children to learn about saving and money. Indeed, even many parents who have a savings account don’t save much. Fortunately, there are many ways children can learn.

LEARNING ABOUT MONEY

Learning about saving can be effective earlier than many people may think. Studies show that children begin to understand money concepts from the age of 2 or 3 years old.

Parents can start with a savings jar or a piggy bank that children can put money into every week so they learn how to save. Some parents prefer a clear jar so children can see their savings grow. Allowing children to take money out sometimes to buy a toy or a treat, too, is a good way for them to understand why savings are important.

Parents who want to do more can get special piggy banks, such as a Money Savvy piggy bank with four chambers labelled save, spend, donate and invest. Tools like this can teach children that managing money is about more than just savings.

Beyond just saving, though, children need to learn how to manage money. Washington University Professor Michal Grinstein-Weiss suggests that parents teach their children financial literacy by discussing basic finances around the dinner table, teaching children how to save for short-term goals such as a new toy or long-term goals such as university, opening a savings account, teaching budgeting, and getting children involved in daily activities such as grocery shopping. Parents can compare prices at stores, for example, and explain why buying certain items makes more sense.

Realistically, parents also need to realise that much of this learning has to happen at home. While the Ministry of Education advocates financial literacy, there is currently no specific syllabus in the school curriculum.

TOOLS FOR TEACHING

Along with talking about savings, using technology can also help children learn about money.

Plenty of apps for children support interactive learning about savings and money. Moolahverse, for example, makes children guardian of their own planet and teaches them to make smart money decisions to grow it. On the POSB Smiley Town app, children can be the mayor of their own town and build home or shops to earn money. Or the Money Savvy Generation Savings Spree app teaches children how daily lifestyle choices can add up to big savings or big expenses.

Child-oriented videos also explain everything from the history of money and concepts of saving to budgeting and investing. PBS Kids (pbskids.org/cyberchase/find-it/money/videos) has a slew of videos with characters who discuss money and budgeting. Maybank’s CashVille Kidz (https://www.youtube.com/user/CashVilleKidz) series, on YouTube, has short videos with financial lessons about saving, spending and investment.

Beyond tech tools, children can also engage in other learning activities. Junior Achievement Singapore offers programmes from kindergarten through JC that introduce students to money, increase their understanding of personal economics, and offer opportunities later on to learn about earning by setting up their own company. Moolahsophy and other courses introduce children to the fundamental principles behind the fundamental pillars of money.

What is especially important is continuous learning. University of Colorado Professor John Lynch found that financial education decays over time, with even programmes with many hours of instruction having negligible effects 20 months after they end, so regular learning and conversations about money are important.

OPEN AN ACCOUNT

When they’re ready to open an account, children can go to a bank and open an account jointly with their parents, whether it’s called Mighty or Junior or Kids or something else.

More than just an account, though, some banks offer incentives to encourage savings. POSB, for example, gives children Smiley Savings Cards to earn prizes for saving and has a campaign to help children learn about the value of saving.

THE IMPORTANCE OF LEARNING

All these steps to increase financial literacy are more important than many people might realise.

Ms Grinstein-Weiss found in her research, for example, that “financial literacy and financial education from a young age play a central role in asset accumulation, shaping individuals’ attitudes, behaviours, and decisions in ways that, ultimately, affect their financial and social well-being.” Parental teaching and role modelling, she said, offer children their first exposure to money management.

The US Financial Industry Regulatory Authority (FINRA) Education Foundation also found that young adults who take personal finance courses in secondary school have better credit scores.

Even more importantly, George Washington University Professor Annamaria Lusardi found that financial knowledge has the potential to account for a large proportion of wealth inequality, so teaching children about money could reduce inequality more broadly.

WHAT’S REALLY IMPORTANT

As University of Wisconsin-Milwaukee Professor Emeritus Mark Schug and his colleagues found in their research, children from kindergarten through grade eight can make gains in their financial understanding if they have the opportunity to learn. “All we need to do is teach them.”

Parents have a critical role, then, in teaching their children about savings and money Starting that education from a young age offers tremendous advantages.

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