Learning to save by starting young

Savings schemes for children in my past
I recall during the good old days of the late 1970s and early 1980s when I was still in primary school, the then Post Office Savings Bank (POSB) had the squirrel savers scheme. This was a scheme where school children could purchase stamps from the teacher, paste them on colour savings sheets issued by POSB and that was how we learned to save money by buying stamps and pasting on it. Of course, at that time I was too young to really appreciate that this was about savings. All I remember is that it was quite fun to paste the stamps since the money came from our parents anyway! :)

Another scheme I remember vividly was by Standard Chartered Bank (SCB). SCB had piggy banks made of heavy metal and secured by a key that only the bank could open. Hence, the piggy bank allowed me to save my coins from my allowance and once in a while my parents would bring me to SCB where the coins could be deposited into my account. I recall the use of snow white characters in my SCB passbook then but I cannot find the old passbook anymore to verify if my memory serves me correctly!

How do we teach our children to save early in life?
These two examples show us how even back then, banks had innovative ways to help parents inculcate in children the habit of saving. How can you then now use some of these methods to teach your own children or nephews and nieces?

First of all, you should make sure you yourself are setting a good example to your children by saving! Then you have the moral authority to tell them that they should be saving their surplus allowances! :-) I am not sure if POSB/DBS still has the squirrel savers equivalent, but you can definitely start out by making sure your child has a piggy bank or a container where he or she can put his spare coins and notes from his allowance savings.

Encourage him/her to save and bring him to the bank when you want to make deposits into your child's account. Nowdays, I noted that POSB provides machines that accept coin deposits. So you can consider making it a fun family activity by involving your child in depositing the coins and to see his balance grow. He may be too young to appreciate it but he will start to associate putting money in the bank as a good thing as he/she had a good time with daddy/mommy when he went to the bank to "play" the deposit game.

You can also celebrate with your child with a simple meal outside or an ice-cream treat after each deposit, to further reinforce the good vibes your child gets from saving money! :-)

Some of you may have even more innovative ways of inculcating the savings habit among your own children. Do share as we go along this journey for our children's benefit to grow up, kidsRich!

What your school teachers never taught you

Financial literacy is one subject that is not only critical but essential for you to be able to navigate this dangerous world filled with financial charlatans, con-artists and consumer debt pushers.

Many of you are parents, many of you are uncles and aunts and many of you have younger brothers and sisters who are still schooling. Think back about your own school experience. Think back to their school experience. Think back... Did you ever receive an education in financial literacy? I believe for many of you and for many of us, the answer is a resounding NO!

But I was taught mathematics and statistics in school!
Mathematics is a useful subject to learn as the very foundations of compound interest computations and simple interest computations plus future values and present values are grounded on mathematics. However, while our school curriculum taught us, teaches our children and will teach our children's children the ABCs and 123s, it misses out completely on equipping our children with the sound financial literacy to be able to know if they are spending more than they earn. To know that consumer debt compounded leads to financial devastation and destruction. To know that if you spend your whole life mired in chasing a consumerist lifestyle funded by debt and credit, your life is not yours but belongs to the financial institutions that provided the noose of easy credit for which to hang yourself with!

If you think Harry Potter was scary, wait till you see the state of financial literacy in our young
Pardon my strong language and expression but it is indeed scary how we are teaching our children to be academic smart but not street-smart in the world of globalised financial markets and where the knowledge of how to use the power of compound interest to grow our financial investments is important in order for one to be able to survive the increasing volatile world of moving interest rates, fast changing business cycles and never-ending sales pitch by advertisers, the media and financial institutions to make us consume, consume and consume to sustain this beast we called economic growth.

Why do I say that financial literacy is sorely lacking
In general, there is a lack of a structured curriculum in our mainstream education to cater for financial literacy. I have never come across any syllabus or lesson that focussed on teaching our children to understand basic cashflow concepts, differences between assets and liabilities, between saving and spending and between how money invested grows and if money owed will grow too.

Perhaps it is being taught in some school, somewhere, sometime. But not during my time. I am an accountant by training, and even as an accountant I can say nowhere in my NTU accountancy course did I learn about financial literacy. Sure I did modules in Corporate Finance and Statistics modules on present value, future value, present and future value of annuities, compounded annual growth rates etc, but I never did come across any module that taught me personal finance and how to manage my own money. And this coming from a Certified Public Accountant (Non-Practising) kind of scares me. It should scare you!

This is not unique to Singapore
The only consolation that we have is that Singapore is not the only country in this boat. Even in the US financial literacy is not something commonly taught in US schools. However, if you are serious about leaving a living legacy to your children, your nephew, your niece or the young people you come into contact with, you should first educate yourself in financial literacy. Read about personal finance. Borrow books such as "The Richest Man in Babylon" or "Bogleheads Guide to Investing" or any of the Personal Finance for dummies book and start your own literacy program right here and right now.

That was how I started, by reading books found in the public library. By surfing internet blogs and personal finance websites, by watching Suzy Orman on CBNC on Starhub Cable. I slowly build up my approach towards financial literacy by learning about savings, about investments, about risk-return trade-offs, about power of compounding, about deferring present consumption in order to grow my investments that will fund my future consumption.

Start Today
So get off all our collective behinds and start to educate ourselves, our children in order to benefit them and our children's children.

The greatest legacy you can leave your children is the ability to think for themselves and make sound financial decisions based on a foundation of financial literacy.

Be well and prosper!