Image via WikipediaSingapore has one of the world's highest literacy rates in writing, arithmetic and reading (3Rs - reading, 'riting, 'rithmetic), but we also have one of the highest financial illiteracy rates.
Why are most Singaporeans financially illiterate?
Financial literacy in my days of schooling was not taught in any formal way. About 50% of my financial literacy knowledge was gained from getting educated through reading personal finance books in the public libraries and in the last couple of years through financial blogs and websites. So where does the other 50% of financial literacy come from?
It comes from my parents. :-)
Now that I am a father myself, I realise that besides providing the basic necessities and love for my daughter to thrive in this world. I also need to impart to her financial literacy skills even as I teach her the 3Rs. So how can you as a parent or concerned relative teach your child, nephew, niece or student financial literacy?
You can of course borrow books from the library about financial literacy and personal finance and a good starting point is this article on the MoneySense website which is sponsored by the Monetary Authority of Singapore. I will review their article titled, "Getting Your Kids Started on Money Management."
Summary of Article
The crux of the article is to incalculate good financial habits in your child early. The authors suggest that we let our children know where money comes from, i.e. from working and not "magically" from the ATM which is what my friend's son told him when asked the same question. Savings should also be a habit that we train in our children from young by getting them to set aside their hong-bao (new year red packet) money or unspend allowances into a piggy bank or children's savings accounts. I remember the old POSB Squirrel Savers programme using stamps was a fun way to teach savings using stamps as the "currency".
Other ways in which the article explores how we can teach our children to “save some, invest some, share some and spend some” by setting aside money from allowances for spending, for savings, for investment etc. The article encourages experiential learning, i.e. for the children to learn from interacting with money and seeing it explained in context of groceries shopping etc. as the means to inculcating in them the money sense.
Panzer's Commentary
This article is relatively straightforward and useful about how we can teach our children simple lessons on savings and handling money. However, it does not address a key component which is parents behaviour. Children learn from their parents whether the parents are conscious of it or not. Thus, in order to foster positive money management skills in your child, you have to lead by example. My own financial literacy came from my own parents sense of frugality and especially my mother's focus on simplicity. She believes in living within your means, savings and in NOT keeping up with your neighbours.
Because of her beliefs and more importantly -- actions, she was able to retire comfortably and now is busy with her own activities whilst lending a helping hand in the bringing up of 4 grand-daughters. She never sat me down to teach me Financial Literacy 101 but her own lifestyle habits and behaviour rubbed off onto me even as I have managed to achieve a positive net worth with my residential home fully paid-up before I hit my 40s.
You want the best for your child as a parent. You want to teach them well. You can give them the gift of financial literacy.
Be well and prosper.
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