household budgeting. Involve them
in the process and play around with
old bills, pretend cheques and cash.
Simple things like creating a shopping
list together and looking at receipts
can prepare them for understanding
the real cost of running a house. Then
you can look at the things they may
“want” and show them how much
money is left each month to dedicate
to things like toys, entertainment or
family holidays. How you manage
money is going to build the foundation
for their own financial values, so it’s
important to set the tone and show
them how to spend responsibly by
doing just that.
At this age, many parents open
bank accounts specifically designed for
young financiers. Whether you choose
to hand them a cash allowance,
regularly deposit money on their
behalf, or simply encourage them
to save their birthday money from
Grandma, it’s a good idea to introduce
them to banking at a young age. As
part of its Premier Account services,
HSBC offers savings accounts for
children aged seven and up, in their
own name. Kids aged 11 and up can
also have an EPS card.
Secondary school years
If you haven’t discussed money with
your children by the time they leave
primary school, don’t panic: it’s not
too late. However, bear in mind that
at this age they may be less receptive
to your words of wisdom. The first
year of university is not a great
time for them to be learning about
managing their money, so give them
a head start and prepare them for the
real world before they leave home.
You can still follow some of the same
lessons as for younger children, but
adapt them slightly. Involve older
children when you’re paying expenses
for them. Getting involved in – and
understanding the costs of – buying
school books and supplies, and paying
fees for extracurricular activities and
uniforms will help them in the long-
run and give them an advantage when
they’re out in the real world.
Teaching them to budget their
own money is also crucial. Determine
what they need to pay for their
expenses and encourage them to spend
wisely and set limits. One technique is
to negotiate how much you are willing
to contribute to the items they want.
For example, your daughter needs new
jeans and you offer to pay $150. If the
jeans she wants cost $300, she must
come up with the shortfall herself.
They’ll soon learn to be careful with
their cash if they have to pay their own
way, and this will, in turn, encourage
saving. Many children are able to take
on paid employment from the age of
15, and provided it doesn’t interfere
too much with schoolwork, children
can learn many valuable lessons
through paid work.
The later teen years are a
good time to introduce children
to the concept of credit, as they
can “practise” while still at home
under parental guidance. To start,
they should have the sophisticated
arithmetic skills required to work
out percentages, and you’ll need
to demonstrate to them how easily
people can get into trouble with
plastic. Explain the concept of interest
rates, and show them the effect that
compound interest can have on a
weekly budget over the years. A Visa
debit card or similar, which is linked
to a cash account, is a great way to
start out with teens. If they prove
themselves responsible spenders, then
they can graduate to an actual credit
card, with a low limit and fairly strict
repayment terms. Many parents find
that giving their children a loan, with
a rate of interest and repayment terms,
is another great way to teach them
about borrowing money. A degree
of transparency when it comes to the
household finances, including loans
and credit cards, is also helpful.
At school, children with an
interest in economics will learn
about the stock market and more
advanced financial concepts. There
are a number of online games that
are a fun way to introduce teens to
investing, and if they’ve followed all
your wonderful advice thus far and
been saving for a few years, they may
have enough capital to begin exploring
their options in the stock market with
your help. If you’re clueless when it
comes to investing, chances are you’ll
Teaching
them to
budget their
own money is
also crucial.
Determine
what they
need to pay
for their
expenses and
encourage
them to
spend wisely
and set
limits.
October 2013
55
