Money Talks: Why the ABCs of financial literacy for children is critical

SINGAPORE: Growing up, Ruperto Ancajas had to account for every cent he spent. His mother - an accountant and a single parent - was fastidious about where money went. So Ancajas and his sister had to fill in Excel sheets on every purchase made. 
 
Looking back, the portfolio specialist from Foord Asset Management said that while it instilled discipline in him, it also showed him that his mother’s approach may have been far too strict. And that has changed the way he is teaching his own children about money.  
 
For one, he allows seven-year-old Oliver who just entered Primary 1 this year, a lot more freedom in deciding. And then he sits back as the child learns how those decisions have an impact in real life. For instance, Oliver asked for a Minecraft wallet to store his pocket money.  
 
The only problem? The wallet came with many pockets and Velcro straps and was difficult to use.

“You can just imagine… he’s at the front and holding up the line, he fumbles and his coins drop all over the floor,” laughed Ancajas. 
 
Now, Oliver uses a simple pouch.  

"All we can do is encourage them, show them the right path, make sure they know what they’re doing by asking questions. And hopefully when they reach their teenage years, and their 20s and 30s, the core is more or less solid and they can make their own decisions."

The key to teaching kids about money is to keep things age appropriate.

“You can’t immediately speak to him about the S&P 500 or discuss the latest move by the US Federal Reserve”, said Ancajas. It can start with the physical handling of money to understand what it is and what it can do, he added.
 
Here are some of Ancajas’s top tips when it comes to starting a conversation with your child on money: 

Start young 

The ages three to eight are really important for learning and development. Kids at that age are like vacuum cleaners, they suck up information.

Show them the money

We’ve kept all his (Chinese New Year) money from the last seven years of his life in an envelope. This year … we’ve decided to set up a bank account. We arranged all the notes and made him count (them). We want him to have ownership of this first batch of money. Then I told him that going forward, everything we buy for him will be taken from this bank account. We tell him: “This is how much school costs, this is how much shoes cost.” Very soon, the money disappears. 

Build money awareness, but don’t be overly calculative 

The danger of (accounting for all spending) is that he becomes stingy, and that’s an absolutely horrible attribute to have as a person. It’s a fine line that we need to watch constantly.

Begin with the concept of saving 

After we’ve opened the bank account, down the line in a few months, I want to be able to show (Oliver) the bank statement. I want to show him the amount of money he put in, and how much interest (the money has earned). The interest is a reward for putting money in a bank and building that bit by bit.

Start off with simple investment concepts 

Take some money out, it could be S$1, S$2, S$3, and put it into a jar. Tell your child: “You have the opportunity to earn one time. And if you make the wrong decision, you will lose one time." With that sort of choice, the child can decide, “Do I make the right decision that will grow the money or make a wrong decision that would lose the money?”

For the full conversation, listen to the Money Talks podcast on teaching children financial literacy.