As the Lunar New Year arrives, the festive season brings joy to children as they collect Ang Pows (red packets with money) from their elders. For many parents, this is a timely opportunity to introduce the concept of money management and financial literacy which will give their children a solid foundation for a lifetime of making sound financial decisions.
The meaning of giving Ang Pows is to bestow happiness and blessings on the younger generation. Come this Lunar New Year, parents can teach children to be self-reliant, responsible and build a healthy relationship with money.
Financial education should be regarded as a lifetime, continuous process. Parents could consider the four steps below to cultivate children’s financial concepts and skills.
Step 1: Saving
Saving is the first financial concept for children to learn. Parents can open a savings account with their children. By embarking on the savings journey together, children will have a better understanding of savings and the function of a bank.
In addition, they will also know that they have the right to use and control the account. This will gradually strengthen their sense of responsibility.
Children often have desires of something to purchase. This is where parents can guide them to set specific saving plans and give them something tangible to aim for. This is a great time to calibrate their children’s attitude towards finance.
Step 2: Spending
Parents should guide their children to thoughtful and responsible spending such as encouraging them to list things they would like before purchasing, whilst defining the difference between wants and needs. This is an important aspect of instilling the concepts of financial responsibility and cultivating the ability to make smart choices.
With gains and expenditures, a good outlook on consumption will be gradually formed. Parents can introduce an account book for their children to record every saving and spending of pocket money.
Keep in mind that children observe and learn from parents’ actions, so lead by example for your children so they can make sound financial decisions too.
Step 3: Investing
As children become aware of money and other financial concepts, this is a good time to show them the power of accumulated wealth. The basics of investing can be taught when children are between eight to thirteen years old. Parents could show their children what financial instruments they own and explain why they chose to invest in those products.
Once their child feels comfortable with the concepts, they could let them participate or get involved in the investment process. This is a good way to cultivate children’s wealth management concepts and basic financial knowledge, as well as to understand building wealth.
For families with good financial knowledge and experience, they can consider introducing foreign exchange knowledge and other investment channels.
Step 4: Giving
It’s also equally important to change the focus to giving rather than solely receiving. Parents could encourage children to help the less fortunate by donating to charity or supporting a worthwhile cause. This is a great chance for children to connect with society, and establish a social responsibility which will have a positive impact on their future growth.
During the Lunar New Year is when many children get to handle their own money for the first time and it is a great starting point to begin wealth management and financial education. Encouraging children to hold responsible views about Ang Pows and wealth at different stages of their lives reflects the respect of parents for their children, nurtures their ability to accumulate wealth and establishes a concept of money, consumption and values from an early age.
Written by: HSBC Malaysia
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