Now that parents and children are having online classes or working from home, it’s for their benefit to find and make the most of teachable moments during the day. One of the basic life lessons that a child must learn is correct money management.
How soon must we teach a child about proper money management? Some parents think that this is too big or too “mature” of a topic for a young child to handle. However, once a child already receives an allowance or keeps money in a coin bank, it is the right time to teach them the basics of proper spending and saving.
Before any other financial lesson, a child has to understand the important difference between needs and wants. It’s the one concept that will help them make correct financial decisions in their young and adult life.
You might think that this should be easy: needs are our basic necessities and wants are everything else that aren’t so crucial to our survival. Nowadays, though, such sharp distinctions are not so easy to make. It involves having frequent discussions on what is a want or a need because, sometimes, it can depend on a particular situation or the person affected.
In general, it’s best to discuss these during moments when a purchase or payment has to be made. When you and your kids get used to such discussions, it helps them learn how factors like price, product quality, and their survival needs have to be considered when spending money.
Once your child already understands how to determine needs and wants, it’s time to go to the next level: helping them save money to spend. This is how you relate the concept of needs and wants with financial skills.
Explain that the reason your child needs to save money is to prepare funds to purchase items that meet their needs and wants. Financial consultant Fitz Villafuerte suggested one useful way to do this with your child: the “three piggy banks” approach.
One piggy bank will contain savings for needs. A second piggy bank will contain savings for wants. And the third one? Savings for charity. That’s a bright idea, right?
Eventually, you will have to move your child to an actual savings account. Since your child is growing up in a digital, information-dependent world, they would need to know the basics of bank savings as well.
BDO makes it easy to open a Junior Savers Account with a very affordable initial deposit and maintaining balance. You can also set up a Junior Savers Plan to help your child grow their savings. This allows you to automatically deposit money from your BDO Online Banking account to your child’s Junior Savers account based on a set schedule for transfer as well as the amount to be transferred.
It’s best to have these regular discussions with them. You’ll be doing them a favor and saving their future.