Cultivating a habit of saving during school holidays

Based on a research conducted by the Consumer Financial Protection Bureau of United States, children are able to understand the concept of saving from as early as 5 years old.

Today, many graduands and young adults find themselves stuck in financial woes, especially debt. This issue may be prevented early on with financial education that starts at home.

Financial skills are lifelong practical skills. Therefore, as parents, you can provide early exposure towards financial management from young. Habits built from young tend to easily stay until adulthood compared to when children learn once they begin to work.

Good financial management includes prudent spending, saving for the future and setting a financial budget. These are among some good practices to have in order to foster effective financial management in the lives of children.

Talking about money with your child

You might be spending a lot more time with your children during the school holidays. So, this time is the best to start having conversations about money or savings with them.

You can start with introducing basic concepts like ‘What is money used for?’, and ‘How do we get money?’. You can also explain concepts of buying and selling to them so that they can better understand the value of money, and the process of buying and selling in daily life.

Then to further deepen their understanding, show them examples in front of them. Give them opportunities to go through real-life experience with money. For example, while buying kitchen necessities, you can give your child some money to make the payment. Allow them to have a feel of the buying and selling experience.

Besides that, you can also introduce the concept of earning money through giving your children incentivised allowance. Pay them “wages” for house chores that they can do such as sweeping the floors, washing the car and doing the dishes.

Explaining the differences between needs and wants

Your children may not be able to save well if they cannot differentiate between their needs and wants. Let them know that needs refer to essentials like food, housing and clothing. Wants, however, are additional things like shopping, toys and the latest gadgets.

While at home, you could quiz them by holding up items around the house and asking whether they are needs or wants. Also teach them that money has its limits. They cannot simply purchase anything they want. If they want to buy a toy, for example, set limits like allowing weekly purchases or setting the budget of a toy at RM10.

Set saving goals

Your children may not understand why they would need to save without rhyme or reason. You can begin to teach them to save for buying their favourite things. If they want a remote control car, help them to construct a savings plans to buy the toy car.

Want to get a LEGO set? Sure, but let’s start saving. Want to get a robot? Sure, but let’s start saving. With this, they may be more motivated to save up.

Next, prepare a place for saving their money. You can start them off with a transparent container or a glass jar. Your children can then see how their savings grow from time to time. Only then can you teach them to save in a savings account such as a bank account, Tabung Haji or Amanah Saham Bumiputera.

Last of all, you can offer additional incentives if they reach targeted savings goals. For example, you can add on RM100 if they successfully reach a savings of RM100.

Introduce the concept of pocket money

Pocket money is one of the best ways to introduce your children to the concept of money. They can use the money to:

• Buy things they want and need
• Learn to manage their expenses
• Begin to understand financial freedom
• Learn to spend prudently
• Appreciate the value of money

Then, you could have a chat about pocket money once a week. You could ask them where they spent the money, or ask if they are saving up for a particular reason.

In conclusion, parents are the best role models for their children. If they see that their parents are spending extravagantly, it is highly likely they would spend extravagantly as well. If they see their parents spending wisely, they would likewise be prudent in their spending too.

Show a good example to your children because effective financial management starts at home. So, use this school holiday season to the fullest!