How To Teach Your Child Financial Literacy: Episode 2 (How To Spend/Save Money)

Teaser: A lot of adults are spending from pay cheque to pay cheque, probably because their subconscious was not wired to control how they spend and/or how to save during childhood.

The ability to spend appropriately and save for rainy days is never an automatic thing for an adult to adhere to. It learnt either consciously or unconsciously.

Just as children, adults were consciously trained to communicate with appropriate words and consciously trained to behave well. The ability to spend appropriately and save accordingly are traits that must be taught children for them to implement in their adulthood.

The concept of helping train the child with spending and saving is not a theoretical activity, however, it is a concept based on practicality.

Any parent who is able to apply the concept to the latter will be free from unnecessary and/or unrealistic demands by children for good and services that are difficult or even impossible to afford by the parent, which is likely to result in even embarrassing situations in public places for the parent. The theories which are best suited for children below and above five (5) years even have the ability to save the parent from spending on impromptu expenditure desires from the child. The two main theories that can easily be practicalised by the parents of the child are illustrated below.

1. Practicing opportunity cost with the child every single occasion: every parent should know the desires or preferences of their children. Knowing this, the preferences of the child is what will be used on the mindset of the child. Children will normally request for items or services to be procured for them either through impromptu request or advance request. The principle is that whenever a child makes a request for anything, the parent will propose a different need for the money to be spent on, for the child. And the expenditure on the proposed item or service by the parent should be items or services that will take place at a longer deadline or something that will not be encountered within the day.

For instance, when a child requests biscuits at a shop, you could ask the child to choose between the biscuit or a yoghurt along the way and hope you do not encounter the yoghurt along the route. Usually, the swapping of items should be of a similar cost. Even when the item is encountered along the route, the parent would have achieved the theory of delay gratification.

Also, children appreciate the cost burden on parents as well and so, a parent can reason with the child that the last money available at the time of the request will be used for another item for greater good. For instance, telling a child that the money to buy a yoghurt at the market is for foodstuffs for the day will be reasonably understood by the child, especially those above five (5) years.

2. The second principle is the use of the susu box: in order to motivate a child to appreciate and use the susu box, the initial duration targets should be short in nature. For example, a month or two months or three months for the child to have the benefits of the principle. The duration can be extended when the child starts enjoying the cycle of savings. The source of money to save could be the amount generated from the principle outlined in how to make money here How To Teach Your Children Financial Literacy: Episode 1 (How To Make Money).

Also, the source of savings in the susu box could be coins found in any corner of the room, which could as well prevent younger children from swallowing coins found in the house.

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