How to teach your kids about money when you’re not great with it yourself

teaching kids about money

Let’s face it: when it comes to our finances, sometimes we’re not the best role models for our kids.

But that doesn’t mean they can’t learn about money from us. It just means we need to be a little more creative in teaching them.

Allow us to outline a few ways you can teach your kids about money, even if you’re not great with it yourself.

Talk about money openly

Speak with your kids about what you’re doing to get your finances in order, and ask them for their opinions. And while you’re working on your finances, be sure to model accountable behavior.

Show them the importance of working hard and understanding the value of a dollar. Kids are smart, and they will learn a lot just by watching you. So make sure to set a good benchmark, and they will be on the right track in no time.

Model saving and spending

If your kids see you routinely raiding your savings account, they’re going to get the impression that it’s okay to spend money carelessly. And that’s not the message you want to send.

On the other hand, if they see you carefully budgeting your money and setting aside a portion for savings, they’re going to learn that it’s crucial to be liable for their finances. So be a standard for your kids and show them how to handle money responsibly.

Help them set financial goals
a child smiling at the coins he saved

Image Credits: realsimple.com

One of the best ways to teach kids about money is to help them set financial goals. This could be anything from saving up for a new video game to putting away money for a university fund.

The key is to make the goals realistic and achievable. You don’t want to set your child up for disappointment by telling them they need to save up to $100,000 for a new car when they’re only 10 years old.

Start small and work your way up. Break down the destination into smaller steps, and make a plan of action that outlines how your child can reach their goal. Offer support and encouragement, and celebrate each accomplishment along the way.

Encourage kids to make mistakes with play money

You don’t want your kids to grow up making the same mistakes you did with your money, so what can you do? Encourage them to make mistakes—with play money, that is.

When they’re young, give them a bunch of fake money and let them experiment. Let them figure out how to save and how to spend, and how to make the right choices when it comes to their finances. It’s a safe way for them to learn, and it’s a lot of fun too.

Plus, it will teach them about responsibility. When they’re handling real money, they will be more careful with it because they know the consequences of making mistakes. So start early and let your kids learn about money in a fun and safe environment.

You’re not alone if you’re not great when it comes to money, but that doesn’t mean you can’t teach your kids how to handle their finances. Start by setting a good example yourself. Show your kids that you’re working hard and being responsible with your money. Then, talk to them about money. Explain what it is, how it works, and why it’s necessary to be smart with it. Finally, give them some hands-on experience with money. Help them open a savings account, or have them do chores in exchange for cash. By teaching them about money from an early age, you can help them avoid common financial mistakes in the future.

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5 Ways to Stretch Your Financial Literacy

Financial literacy is a life skill. Similar to other life skills, financial literacy takes time to learn. Starting your journey can be intimidating and daunting for some Singaporeans.

As personal finance is not typically taught in schools, you need to take conscious decisions to improve your own skills. Whether you are an expert or a novice at financial literacy, keeping your knowledge base growing matters!

#1: READ MORE FINANCIAL BOOKS

Retail CEO Sandra Campos believes that financial literacy is a skill that you should never stop acquiring. She encourages people to read trusted publications to stay informed about understanding how to manage your finances better. If you opt to listen to financial podcasts, you may do so.

Financial podcasts can be a wonderful way to absorb financial news while you are fulfilling your other tasks. You can listen to these podcasts as you run errands, travel to work, complete your housework, walk your dog, or exercise in the park.

#2: TEACH YOUR CHILDREN THROUGH PLAY

Learning about money does not have to be a two-hour long lecture. One of the most effective ways to connect with your children is to introduce play-based learning. It provides them with a friendly environment to test new skills and gain confidence with challenging topics. Make learning fun by playing financial literacy games with your kids!

Ignite a family competition by playing money board games or trying out activities that are suitable for your child’s age. You will not only help your child start a healthy relationship with financial education, but also improve your quality time.

#3: EMBODY THE FRUGAL MINDSET

Embrace the frugal mindset to improve your budget. Take your monthly expenses under a microscope and inspect if there are unnecessary costs that you can eliminate. For instance, you may purchase second-hand children’s clothes instead of new ones. Eliminating unnecessary costs can move you closer to your financial goals.

Despite being frugal, there are some expenses that you cannot skip! Prioritize groceries, household supplies, and other non-negotiables. For these expenses, make sure that you are getting the best price.

#4: FOLLOW YOUR WELL-DEVELOPED BUDGET

A well-developed budget can operate itself if you stick to it.

It can help you identify where your money is going. So, start tracking your spending using a simple spreadsheet or mobile budgeting apps. Saving an accumulation of lesser amounts can go a long way.

#5: SEEK PROFESSIONAL HELP

If you need additional assistance from a financial professional, you can research credible local organizations. A financial professional can answer your money questions ranging from day-to-day money issues to more complex long-term situations.

Image Credits: pixabay.com

This professional will begin by assessing your current situation to help you plan for all your financial needs to move forward. Remember that your financial is a lot like your physical health. You need regular exercise and check-ups to sharpen your financial muscles!

BONUS TIP: EDUCATE YOURSELF THROUGH TECHNOLOGY

Expand your financial literacy by educating yourself through virtual methods. You can soak up financial news through podcasts and newsletters or follow your favorite social media channels. There is a wealth of financial podcasts available on Apple and Spotify including The Ramsey Show, Yield Hunters, BT Money Hacks, and Money for the Rest of Us.

What’s more? You can follow Money Digest on Facebook to consume free financial news and latest deals in Singapore.

Sources: 1 & 2

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4 Important Things Teens Don’t Know About Finances

An eye-opening study showed that only 17% of teenagers between the ages of 12 and 17 knew how to manage their money. Among these respondents, 24% said they did not know the difference between credit and debit cards. Budgeting was a concern as well as learning how to save money.

One of the reasons why the teenagers lack knowledge of money matters boils down to their parents. They elaborated that their parents were not doing an excellent job in teaching them about money. Moreover, personal finance was not embedded in most of the academic institutions.

Fill in the gap by instructing your children about these important financial subjects.

#1: BASICS OF BUDGETING

Budgeting is among the biggest priorities of teenagers. Budgeting allows an individual to track where the money is going and where it needs to be. While it is tempting to accept money from your parents and quickly burn through it, it is vital to know how to maximize it.

Parents must not let their children be dependent. They will end up unaware of how to manage their finances.

#2: BASICS OF BANK ACCOUNT

Instilling in children the concepts of earning, saving, and investing is essential in developing life skills that they can use in the future. Opening a bank account or a savings account can help the teen to manage his or her own money.

Image Credits: unsplash.com

Knowing the basics of bank account such as navigating through the online banking and transferring funds to other accounts is important. As there are no up-to-date teaching tools to help teens learn about bank accounts, you may take your child to the bank to get a hands-on experience.

#3: POWER OF COMPOUNDING

Compound interest is the interest on a deposit or loan calculated based on both the accumulated interest from previous periods and the initial principal. Time is the teens’ friend. They all have the potential to be millionaires someday, but the odds of attaining that goal increase sharply if they save early.

You can start by putting away a reasonable amount per month. Let it grow!

#4: POWER OF EMERGENCY FUNDS

Whether you come from an affluent household or a modest one, putting away some money for emergency use is essential. Parents may teach their children about the importance of emergency funds by painting real-world scenarios such as assigning a job per child. Ask the child what they would do if they suddenly had twins or a critical illness. Remember to keep things simple by excluding complicated jargons to your conversations.

Image Credits: unsplash.com

Make it a priority as a family to be more mindful with your money. Spend less and celebrate how money is grown over time.

Sources: 1 & 2

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Your Ultimate Guide To Financial Literacy: What It Is & How To Improve It

DEFINITION

Financial literacy is the ability to understand and efficiently use various financial skills including financial management, investing, and budgeting. Financially literate consumers not only manage their money with confidence, but also have a better chance of handling the inevitable ups and downs of their financial lives.

It is the foundation of your relationship with money, which enables you to create a lifelong journey of learning. It will help you understand how to prevent and manage financial issues as they arise. The earlier you start, the better off you will be.

On that note, here are the advantages of financial literacy.

UNDERSTAND HOW MUCH YOU SPEND & EARN

When cultivating financial literacy, establishing a budget can give you a clear understanding of your expenses and income. Once you have a budget in place, you will be able to track your spending and revisit your spending plan regularly. With the variety of budgeting methods such as 50/30/20 plan, you can choose one that suits you best.

PAY OFF & AVOID DEBTS

Searching for the lowest interest rates when comparing loan terms can help you save a substantial amount of money over time. If you already have debt, financial literacy can help you select the best methods to eliminate your debt. You can pay off your credit card balances each month, so you do not get trapped by the interest charges. You can look for a credible expert such as a credit counselor if necessary.

WORK TOWARDS FINANCIAL SECURITY

Saving for retirement will enable you to secure your future. As you become more financially literate, you will be able to examine how much you need to save to obtain your retirement plan. You will be able to carve your action plan too.

WAYS TO BOOST YOUR FINANCIAL LITERACY

1. SET A BUDGET

Track your earnings and expenses each month by using an Excel Spreadsheet, a ledger, or a budgeting application. Your budget should include your incomes (e.g., investments and paychecks), fixed expenses (e.g., rent and utilities), variable expenses (e.g., shopping and travel), and your savings.

2. PAY YOUR BILLS ON TIME

Stay on top of your monthly bills by making sure that payments arrive on time. Consider taking advantage of automatic payments or signing-up for payment reminders (i.e., by email, SMS, or phone call).

Image Credits: unsplash.com

3. BUILD YOUR SAVINGS

Building your savings will help you reach your financial goals. Decide how much you want to contribute each month and stick to it.

4. CHECK YOUR CREDIT SCORE

You can request your credit report from Singapore’s credit bureaus. Companies assess your creditworthiness by looking at the credit score. Having a good credit score has its perks such as helping you obtain the best interest rates on loans and credit cards.

5. MANAGE YOUR DEBTS

Utilize your budget to manage your debt. You can devise a plan to reduce your monthly spending and increase your monthly repayment. Develop a debt-reduction plan such as paying for the loan with the highest interest rate first. If your debt is excessive and overwhelming, you can contact lenders to re-negotiate repayment or find a debt-counselling program.

Sources: 1 & 2

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Should you let a robo-adviser dictate how you invest your money?

UOBAM robo-adviser

Several consumer-facing Financial Technology (FinTech) companies, from digital payments to insurance and transfer payments, have arisen to support Singaporeans’ personal finances. You may have heard of robo-adviser companies such as StashAway, Syfe, and AutoWealth that help with investments.

What are robo-advisers?

To optimise investment portfolios according to the risk profile of the customer, Robo-advisers rely on algorithms. In reaction to market changes, portfolio readjustment is performed automatically.

As such, there is little need for active monitoring by the investor with all these automatic features. As seen from various posts and comment threads on local financial platforms, the low fees paid in relation to human investment advisors have further raised interest in robo-advisers.

A Statista study forecasts that assets under watch by local robo-advisers and user numbers are estimated to rise by over 50 per cent in 2021 to hit US$1.06 billion and 105,000 users accordingly.

Robo-advisers help break barriers to entry
asian-man-using-mobile-phone

Image Credits: Freepik

The perceived difficulty of gaining financial expertise and the scarcity of time for investment and fund management are two widely quoted reasons for not investing.

With technology assistance, robo-advisers eliminate these hurdles, making them a fantastic way to kickstart investing, particularly for beginners. This is not to mention that the procedure of signing-up is reasonably straightforward.

In 15 minutes, a profile can be registered. To propose an appropriate portfolio concerning the investor’s financial targets and risk aversion, one only needs to answer some preliminary questions.

Standard considerations include age, gender, marital status, salary, investment horizon, and priorities, such as funding for a house versus retirement planning. At the same time, risk evaluation focuses on experience with multiple financial instruments and gain and loss perception.

Once that is in place, algorithms based on current financial models will handle the portfolio. Easy peasy, isn’t it?

Advantages of using robo-advisers

The isolation of feelings from investing using robo-advisers is a gain. Investors are far less likely to respond irrationally to disruptive market developments and exit from the market out of panic, with investments using advanced automated trading.

Robo-advisers often foster healthy financial habits by encouraging clients to add to their investments on a routine basis. This induces investors to take advantage of the dollar-cost averaging (DCA), which has been proven to be a successful method for allowing the long-term accumulation of capital by novice investors.

A look at the downsides
having a discussion

Image Credits: fa.com.sg

No one thing in the world is perfect, and this applies to robo-advisers too. Given their emphasis on ease and effectiveness, robo-advisers cannot make investment decisions precisely personalised to each user’s financial condition.

Instead, they enable clients to pick from pre-selected portfolios from a restricted menu. They deal only with personal finance’s investment facets and miss the human touch of actual financial advisors.

Human financial planners devote much more time to identifying the needs of their customers. Thus, they can provide numerous solutions that cover various holistic financial management elements, including savings and coverage.

Is investor passivity harmful?

The low percentage of investor participation needed is one of the principal selling points of robo-advisers. But is the lack of investor involvement a cause for concern?

Investor indifference may foster a laid-back approach towards other areas of financial planning. Since computers and algorithms can assign this seemingly cumbersome task, this may lead to a refusal to gain financial expertise going forward.

Although robo-advisers cater to tech-savvy, passive, and limited-capital investors, automated investment does not appeal to active investors. This is especially so for those who want to have portfolio ownership and may be dissatisfied with having a bot controlling their assets entirely.

According to an HSBC survey done last June, only one-quarter of Singaporeans had used mobile banking to invest. This hesitation in handling digital capital shows the real lack of investment expertise or trust. It also highlights the need to empower Singaporeans with financial knowledge.

Lack of financial knowledge can be devastating
investment-stock-photo

Image Credits: City Nomads

Dr Gordon Tan Kuo Siong, Faculty Early Career Award Fellow at the Singapore University of Technology and Design, shared how a lack of financial knowledge can be devastating.

Using the story of Alex Kearns, he brings out the importance of financial literacy. Last June, the news reported the death of the 20-year-old trader by suicide. After Kearns mistakenly thought he lost hundreds of thousands of dollars on Robinhood, a free-trading app, he took his own life.

For sound investment and financial planning, the acquisition of knowledge is necessary. As the term “caveat emptor” indicates, consumers’ ultimate responsibility is to perform proper research when making a transaction. Buyers should request information on the details of the items they purchase.

In short, consumers should arm themselves with the information they need on the investment products that robo-advisors suggest. As for the businesses who promote these services, it is vital to ensure adequate resources on how their products operate.

Some deets on local robo-advisers

Several local robo-advisers have also launched educational initiatives to develop more educated investors. A set of courses covering personal finance and trading on its app, as well as frequent newsletters and market insights, have been made freely available by StashAway.

Syfe posts short articles and conducts online seminars to provide the public with financial information. These programs are praiseworthy and should not be treated as unnecessary supplements.

In conclusion, if robo-advisers boost their customers’ financial literacy and consumers make an effort to consider what they are investing into, buyers will have much more interest in creating machine-enhanced financial decisions and endow their money to a robot.

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