Whenever we would visit the toy store with my 7-year-old daughter, she would throw a tantrum until she gets what she wanted to buy. I find this so frustrating because I need to save money too. I want to teach my child how to spend properly. Can you advise me?—Roxy by e-mail
Every parent would like to see their children to be successful and live a happy life when they grow up. You want to provide them the best education and encourage them to excel academically so that when they have finished their college education and are ready to work, they can earn high salaries and become wealthy eventually. To some parents who are in business, they want to groom their children for success someday and make them future COOs (Child Of the Owner) who will grow and keep their business for the next generations to come.
These are ideal situations every parent dreams of. But the reality is not everyone succeeds financially. There are people who do well academically. They graduate with honors from high school and college but they end up struggling financially despite their high-paying jobs because they hardly have any savings or they carry too much credit card debts. There are also COOs who fail their family business because they mismanage the money they inherited from their parents. Do you find these stories familiar?
Many of these people learn their money lessons the hard way. It is not in having lots of money, but rather in the ability to manage money well that guarantees you financial success. When you have the right money management skills, you can work your way toward financial freedom. You may not necessarily become multimillionaire, but you can earn enough to afford whatever you need to buy without the stress of borrowing or depleting your hard-earned savings.
As a parent, you want to teach your child how to handle money early so she can practice the discipline of money management skills early on until it becomes permanent habit as she grows up. Children who know how to save and spend money are more likely to acquire good money sense and develop confidence in decision-making. When they become adult, they will have the advantage of handling more difficult tasks such as planning for investments, retirement, taxation and others.
There are many ways you can teach your child about money. When you teach, try to make her learning experience positive so she will be encouraged to learn more.
“Teach by example. Evaluate your attitude on handling money. Do you budget your spending regularly? Is money a frequent source of conflict with your spouse? Do you pay your credit card debt on time? What your child sees and hears from your experiences influences their values and beliefs toward money. If you think you need to have a good understanding of personal finance matters such as budgeting, investing or savings, then it will be wise to educate yourself first and practice it.
“Teach by sharing. Involve your child in family budgeting. You can make your child understand how you are spending your income and what you are saving for. By understanding budget, she will learn how to differentiate between needs and wants and she will less likely make unreasonable demands to buy things she doesn’t need. As she grows up, the values she learns from the family discussions will prepare her to make good budgeting decisions.
“Teach by setting goals. Discuss your short-term and long-term financial goals for your child. You can make her responsible by agreeing with her to achieve certain goals for a prize. For example, you can say that you will give your child a certain amount of money as prize, which she can use to buy toy or anything equivalent in amount if she can finish this school year on the honor roll. She can learn the value of earning the prize by working toward achieving the goal.
“Teach by making choices. Give your child opportunities to make decisions about money. When making decisions, she will learn how to prioritize and make the right choices. Once a choice is made to buy a particular stuff, the same money cannot be spent for another option anymore so there are lost opportunities. Of course, children can make poor choices. You can guide her and provide encouragement, emphasizing that when she makes decision, it should be based on her values and goals.
“Teach by shopping. Develop your child’s buying skills by comparison shopping. For example, you can bring your child to the grocery and explain to her why you choose one item over the other by citing the price and quality differences. You can let your child experience shopping by giving her a budget, say P35 and let her choose any item at that price or below and once she has already chosen one, ask her to explain why she chose it. In this way, your child will learn to make the right purchasing decision.
Being a good parent involves providing our children all the tools they need to become successful and happy adults in the future and one important skill that they should not miss out on learning is about money skills. If you want to learn more about helping your child learn how to manage money, RFP Philippines is organizing a financial parenting seminar on “Raising MoneySmart Kids” on March 17 at the Crowne Plaza Galleria. Reserve your slot through this link www.rfp.ph/moneysmart to get 20-percent off up for limited time only.
Henry Ong, RFP is a registered financial planner of RFP Philippines. You can e-mail him for comments and questions at hong@rfp.ph. To know more about how to become a registered financial planner, visit www.rfp.ph or inquire at info@rfp.ph.