From Preschool to Tertiary Education: 11 Important Personal Finance Lessons to Teach Your Children

Back when I was in Primary One, my Mum bought me a clear piggy bank and taught me the importance of saving.

This is one of the lessons I hold dear and has improved the way I manage my money.

I may not be a parent, but I would think that as parents, you would want to set up your child to do well in life.

Teaching your children financial literacy from a young age is vital as it allows you to understand and make the most of the money that you earn or receive. The right financial education can be life-transforming.

As such, if you would want to give your children a head start with financial literacy and set them up to succeed with money at any age:

Here is a great place to start!

TL;DR: Ultimate Guide to Teaching Your Kids About Personal Finance

Teaching your children how to manage their money from preschool to tertiary education will equip them with a solid foundation to help them achieve success in life.

Here is how to go about it.

Preschoolers and Kindergartners

1. Explain how money works

2. Start them saving

3. Teach by example

Primary School

4. Teach them the value of money

5. Teach them to avoid impulse buying

6. Teach them to be generous

Secondary School and Junior College

7. Teach them how to budget

8. Get them a bank account

9. Guide them to find a job

10. Get them into investing

Most importantly you will need to also help them understand the importance of why and how financial literacy will help them to achieve success in life.

Preschoolers and Kindergartners

A study by researchers at the University of Cambridge has found that by the age of seven, children will already have developed some money habits.

This includes stuff like counting, a basic understanding of value, exchange and equivalence, and the concept of ‘earning’ and ‘income’.

Thus, it is important for you to teach them about financial literacy at a young age.

1. Explain How Money Works

Once your children are old enough to know that coins are not food, you can introduce your preschooler to the concept of money.

Explain to them about the concept of money as a medium of exchange, how it stores value and show them how it works.

A good way to do so will be to give them some money and get them to pay for the purchases that they make.

Even in our cash-lite society where you pay with cashless payment methods, you can show your children the receipts and highlight the amount you paid.

2. Start Them Saving

After teaching them about spending, the next step is to teach them about saving money regularly. This helps your children develop discipline, learn how to set goals and the concept of delayed gratification.

As soon as you start giving them an allowance, buy your children a clear piggy bank so they get a clear visual of how the money is growing.

In addition, for something more tangible, you can get them to create a savings chart which can involve them colouring in the coins they need to buy the toy that they want.

This will help them practise delayed gratification and help them feel that they are working towards a goal.

At this age, it would be easier to teach them how to save towards goals — like buying the toy they really want.

Encourage them by telling and showing them how you enjoy saving and how it makes you happy to prepare for the future.

3. Teach by Example

A good way to teach them these good financial habits is to set a good example. Your children are constantly watching what you are doing and sometimes, what they see you do is more important than what you say.

When you practise what you preach and communicate a consistent message across your actions, you can send a powerful message to them.

For example, you could buy the same piggy bank that you bought for your kids and save the loose change that you get. I understand that this may seem strange, but it helps!

Primary School

As they get older and start attending Primary school, you can teach them about more advanced concepts

4. Educate Them About Opportunity Cost

First off, you can start teaching them about opportunity cost, as children at this age will begin to understand decision-making better and learn more about potential outcomes.

FYI: Opportunity cost is the next best choice to the one you made. It is not just any other choice, it is the next best choice.

An excellent way to show this to your children is to get them to choose between purchases. Tell them that if you buy this toy, you will not be able to afford the video game that they want.

This will teach them how to live within a budget and make the most of their choices.

5. Teach Them The Value of Money

Even though giving them an allowance and teaching them how to manage it is great, you can consider creating a system to get them ‘earning’ their money by doing chores.

The rationale for this is that we tend to value money differently if you are earning it instead of it being handed to you.

For example, when I was younger, my Mum would give me a base allowance that was enough for my needs. If I wanted more, I would have to iron clothes to get more allowance.

This made me more careful with my money as it was hard-earned.

6. Teach Them to Avoid Impulse Buying

With the money they earned from doing chores, your children might want to spend all their hard-earned money immediately.

However, you should encourage your children to keep a spending diary. When deciding if they want to buy anything that is expensive, you can encourage them to write it down in the diary before buying.

Then, get them to come back to the diary after a day or two when they have more clarity before making this decision to spend their money.

7. Teach Them to be Generous

Notre Dame’s Science of Generosity Project defines generosity as ‘giving good things to others freely and abundantly’.

If you value being generous and giving to others, you can pass on this value to your child at an early age by doing things like having separate piggy banks for giving and saving.

You could also ask your children what kind of charity or organisation they want to support and involve them in the act of giving.

Secondary School and Junior College

8. Teach Them How to Budget

I feel old to be saying this but nowadays, children spend a lot of time on their phones.

Why not make the most of it by getting them to download the Seedly App and get them accustomed to the habit of budgeting their allowance?

This will help them understand the importance of planning how to spend their money, which is an essential financial literacy lifeskill.

At the end of the day, it is not about the amount you make, but how you manage what you make that makes all the difference.

9. Get Them a Bank Account

To take budgeting and money management further, you can consider getting your child a bank account.

This bank account is like ‘training wheels’ for your children to help them prepare to manage a savings account when they get older.

10. Guide Them to Find a Job

Depending on what you are comfortable with, you can consider helping your child to find a job.

Getting a job at a young age will further drive into them the value of money and how difficult it is to earn it.

In addition, this will help make the transition to adulthood smoother as finding a job is an important first step to #adulting.

With this job, your child will be able to practise independence and self-reliance.

11. Get Them Into Investing

I’m sure all you savvy Seedly readers know about the magic of compound interest.

The concept of compound interest states that you should start saving and investing now.

The earlier you can get your children investing the better, as it will give them a headstart on preparing for their future.

If you are interested in giving your child a headstart, my colleague Kenneth has put together a comprehensive guide to how you can get your kids into investing.

What Are Your Thoughts on Financial Literacy for Children?

Jump in the discussion on our friendly SeedlyCommunity, where you can also ask questions about investments, stocks, career, property, CPF, credit cards, savings, insurance and get them answered by our savvy and helpful community members!