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Generally, children are not often given lessons on how to manage their money.
Some feel that their children are too young to learn about managing money which is
generally described as "complex".
Most children discover to use money and show interest in the concept of money at
the age of three or four. Although they do not really appreciate the real value of
money, they believe money has certain rewards. They know that money can be exchanged
for something which would make their lives happier.
When they can easily get a few Ringgit to buy something they like, they will quickly
figure that money is something that is easily obtainable. As long as they "beg"
long enough at no matter what the cost, their parents will give in to their demands.
Most children do not learn on how to manage their money until they have grown up
which is probably too late. To make matters worse, most children are frequently given
more than what they basically need. As standard of living increases, paying more
than RM150 for a pair of new jeans for a 13 year-old school boy is quite common.
Children have more money to spend and can easily develop bad habits from at a very
young age. Those habits will last a life time if the problem is not checked at early
stage. As a result of parentsí indulgence or plain ignorance, most children fail
to develop good financial habits - particularly important now in view of the crisis
afflicting the country.
As soon as children know how to spend probably at the age of five years old,
it is time for them to learn the importance of money. Like adults, children can learn
how to manage their money through the process of trial and error. Clearly, some valuable
guidance from the parents about the basics of money management can make a big difference.
It is always easier to teach them at an early age. It gives parents good opportunities
to cultivate positive financial habits and avoid problems that might emerge in the
later part of life. The later the stage, the harder to change bad habits.
Practical experience is a must in order for children to learn. Do not be afraid
to give a certain sum of money or allowance to your children. Let them experience
the power of money and the benefits of learning to save. They have to learn from
mistakes and the cost is usually minimal at a younger age.
Giving allowance is the best method of teaching your child how to save and spend.
With some advice from the parents, let them learn to manage their money themselves.
Some parents give allowance to their children for different reasons. Some children
are required to do household chores in return for a daily or weekly allowance. Other
parents demand nothing from their children. The children get their regular allowance
for doing nothing.
Some parents may ask, "should I compensate my children's work with allowance?".
"Should I pay them only if they have done something or have performed a certain
amount of responsibility in the house?"
A child psychologist asked a parent "do you want your children to bargain how
much you are willing to pay each time you ask them to do something?". "What
if your child does not need the money on that particular day, is it alright for them
not to do anything at home except watch their favorite cartoon programs all day long?"
Basically the problem arises if parents tie allowance to chores. It is critical
that parents sit down and think of a solution which they think could work for them.
Different parents will have different programs for themselves.
The appropriate formula is, allowance should not be used as a control device to educate
the children about money management. Children should instead be taught to understand
that doing household chores is part of the family life. In other words, everyone
should play his or her role as a member of the family regardless of monetary rewards.
You can reward them with a warm hug or praise for doing chores well.
Allowance should not be viewed as privilege for the children and should not be attached
to chores. Allowance is in fact money that parents are going to spend on them.
Instead of paying something to them when they have performed certain duties or when
they have "begged" long enough, give them the money and let them decide
for themselves how to spend the money.
However, there should always be a limit to how much you should give regardless of
your financial background. This way, it forces them to accept the fact that they
simply cannot have everything they want.
Do not automatically "bail-out" your children everytime they have make
the mistakes of overspending. The "bail-out" should be off-set with something
else like a reduction in next month allowance. Children should be taught to value
money.
There are many other ways of educating children about money. Whatever you decide,
it is important that you remain consistent and not practice favoritism. Never attempt
to threaten to stop giving allowance to force them to correct the mistake. Your action
may confuse them between discipline and money management.
Giving them an allowance helps to develop your children to appreciate what it means
to earn a living. If your children want additional money for something that they
do not really need, make them work for it. Let them know that money just does not
fall out from the sky.
"How much is enough for my children?" Age is a factor that parents
should consider. A 3 year-old child will need less allowance than a 10-year old.
Cost of living is another factor to consider. Children in rural areas or smaller
towns normally enjoy a lower cost of living than in a city like Kuala Lumpur thus
this will require lower allowances.
One alternative is you can sit down with your children and discuss in detail what
they need or things they are expected to pay for. The total required will become
their basic allowance. Avoid giving them far more or less than what your children
need.
As they grow up, needs change. Thus, adjust your allowance accordingly. Be open and
diplomatic when your children approach you for more money.
At the end of the day children tend to have more appreciation for the things they
buy if the money comes from their own pockets. The limit of allowance will force
them to look at the price tags before buying.
Start them young and the habit will be well-incalculated in them when its time for
them to really manage their own money.
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