Friday, October 24, 2008

teaching kids the true value of money

last two weeks i brought megat to a local bank to save some of his raya money. its been like four years i practice this with him— we count the raya money together, brought half of it to be saved in the bank and i let him keep half of it. when we were at the bank, i taught him of how to write the form himself. besides that he also took his own number queue and met the bank teller himself. i guess this way megat can learn the process of saving/using money along the way. what when i heard the bank teller had a quick conversation with megat and gave him some encouragement on saving money— " haa... bagus adik simpan duit dari kecil, senang nanti nak belajar bila besar. spend, jangan!" wow... thanks a lot dude!

well since this year he got quite wholesome than the previous years, i managed to convince him that we kept 3/4 of it in the bank. while megat shall keep the balance. like last year, from that money that he kept himself, he bought some hot wheels toys, books and such. so far alhamdulillah... megat understands of how important the money is that we shall start to save it from young.

teaching kids about money involves several aspects. first, kids generally learn about the face value or denomination of money. kids learn that money can be exchanged for goods, such as when a parent might explain that in order to get a toy that the child may see in a store, or on TV in a commercial, they (or you) must exchange money for the toy. a little later on usually, kids learn that when they receive money, they can save that money up to buy something they want. they may not have enough money at the time, but if they save up money they receive, one day in the future they may be able to buy that certain toy or item.

unfortunately, this is where a child’s education about money sometimes ends, even into adulthood.

the “real” value of money, in essence, is that it can represent future opportunity and freedom. money should not only be thought of as a vehicle to purchase things, but as having value to allow one to make choices in life that one would otherwise be unable to make without it, have the means to take care of oneself or family, and have the freedom to make choices that being in debt does sometimes not allow us to make. often, we are constrained by financial obligations and all of those things we must have and save up for, that we do not realize we are limiting opportunities and the freedom of choice when it comes to our lives that financial freedom can bring us. not having enough money can limit our job choices, where we live, and what we do with our lives.

how do you teach kids about the value of money ?

  • start them saving early—give them an allowance starting at a young age, and get them used to saving money—just for the sake of saving.
  • teach them not to save just to spend—if they save money for things, instead of saving for their future, it will be difficult for them to realize the freedom money can give them in the future. making them save a percentage, and not taking every cent in the piggy bank to buy a new toy or game, is a good idea.
  • stress the importance of choice and freedom—saving money for education, experiences, etc., as opposed to materialistic things. it’s not always about things. sometimes having money in the bank allows you to do things you would not be able to do without money.
  • use real life examples—explain that if they buy the new ben 10 toy, they won’t have any money left. this will limit their choices in the future.
  • let them make mistakes, but point them out so they learn from them. it’s OK to let them make mistakes, but try to teach something when they do.
  • teach them to be generous—all the money in the world won’t buy friendships, relationships, or love. while money can be an important tool, relationships with people are more important in the grand scheme of things.

have you started teaching your kids on saving? what method do you use? care to share some tips here?