You want the best for your kids. Besides providing them with the best education and helping them develop their character, it is also important that kids learn about the importance and value of money when young. This is a crucial life skill that can set them up for success as they grow into financially savvy adults. That's a win for you, too!
But teaching young children about money is easier said than done. How do you get them to understand an abstract concept like money while keeping their interest? Here are a few ways.
Learning to save is the foundation of great financial habits. But simply telling your child that it's important to save won't work if they can't see how it will pay off. Instead, motivate them by helping them set short-term goals, such as saving for a new toy. You can tell them, for example, that keeping RM10 a week means being able to buy that RM50 toy they want in five weeks.
Young children may not easily grasp the concept of having money in the bank, as they can't see where it goes. Having something that they can easily visualise – or better yet, physically hold on to – can help them understand the concept of savings. Here's where a passbook comes in handy. Recording their savings in a passbook allows children to visualise how much they're saving and spending and even help them build crucial math skills.
Alliance Buddy Children Savings Account/Alliance Junior Smart Saver-i offers a bonus profit of 10% on the total interest/profit earned for the year if you do not make withdrawals*.
*Deposit products are protected by PIDM up to RM250,000 for each depositor.
How do you teach kids the concept of compound interest/profit? Here's a simple analogy.
Putting your money in the bank is like planting a seed. As you water the plant and care for it, it will grow into a large tree. Then, this tree will make its own seeds that will grow into other trees and eventually a forest.
Saving money is just like planting a seed and caring for it. The longer you save it in the bank, the more your money will grow.
But you know what's better than telling them about compound interest? It's showing them how it works with their own money. With the Alliance Buddy Children Savings Account/Alliance Junior Smart Saver-i, interest/profit is calculated daily and credited every month. You and your child can review the kids account balance together, so they can see how their money has grown. With compound interest/profit, you can teach kids that it's not worth withdrawing their savings for every shiny new thing that comes their way. Instead, the longer they hold on to the money in the bank, the more it will grow – allowing them to save up for something truly valuable in the future.
As any parent knows, your child's habits (good and bad alike!) are often learnt through observation. So if you want your child to practise good financial habits, it starts with you. After all, it can be confusing for a child to be told they must be careful with money, yet watch their parents not practice the same discipline when spending their own money.
This means getting your finances in order by making sure you have an emergency fund and saving at least 20% of your income with the help of a high-interest/profit savings account like the Alliance SavePlus/-i Account. It also helps to have discussions about your family spending with or around your child – this helps them understand how you prioritise spending.
Besides teaching your children about great financial habits, one of the best things you can do for your child financially is to help them pursue their dreams. But getting a higher education can be expensive. A four-year pharmacy degree at a university can cost around RM12,000 (for local) or RM200,000 (for private).
To meet these costs, you'll have to start saving and investing early. One way is through the Elite Kids Saver, an education savings plan to help you prepare for your child's future. With this plan, you'll gain access to funds through a college start-up benefit. It also offers insurance coverage to protect your child as you save.
This article is adapted from iMoney's article.