Financial management is crucial in life planning for everyone, from recent graduates to parents with families, and their ability to manage their wealth properly is commonly measured by the term “Financial Quotient (FQ)”.
In truth, FQ is more than just a concept applicable to adults but is very much relevant in children’s education as well. By following the following 3-step approach to incorporate the right financial concepts in your parenting methods, your children will get a head start to reap long-term benefits from financial prudence!
Step #1: Introduce Finance Concepts 101 – Saving, Spending, and Earning
Getting direct exposure through real-life situations and experience is the best way for kids to learn about money. While most parents are open to giving pocket money to their children as a standard practice, parents can utilize this as a chance to instil the three crucial financial concepts of saving, spending, and earning.
Saving — Help kids understand the value of delaying gratification in exchange for larger returns by teaching them to save a reasonable amount of money for use in the future.
Spending — while it is a good idea to allow your children certain freedom to decide how they spend their pocket money on items that do not require parental Approval, such as snacks and small toys, it’s crucial for kids to know the difference between “needs” and “wants” before every purchase, and to spend it sensibly with saving in mind.
Earning— In addition to providing children allowance outright, you can assign them tasks and chores to complete in order to earn their pocket money. This will help them understand that money is not unlimited but there is no free meal in society. As children learn to earn through tasks and chores, that would also foster proactiveness, as well as hone their daily-life skills for them to develop independence and a better understanding of money and reward.
Step 2: Utilize a Financial App
Children need to appreciate the movement and destination of money and develop the habit of recording their income and spending. Through observing and developing the concept of cash flow, children learn to manage their own wealth and plan accordingly to spend in the future while keeping track of how much they save and spend.
With children’s easy access to mobile phones nowadays, there are many good mobile apps which are fun and beneficial for financial education. For example, Expensify– the US-listed app famous for its functionality; Monny Rabbit– a cute rabbit helping you with daily accounting; andShareroo customised for couple’s joint accounting.
Last but not least – FinPod – the perfect app for children to start recording and managing their own money. While integrating important elements of education, finance and entertainment, the intuitive user interfaces and gamified features allow both parents and children to stay on track with their parental and financial objectives, while letting the kids have fun while picking up important concepts in financial literacy.
Step 3: Open a Child Bank Account
As children start to develop the habit of saving money and learn about financial planning, it could be a good idea to open a bank account for them to learn how to manage their own accounts. Children under the age of 11 in Hong Kong are allowed to open a children’s bank account, where they could learn about broader concepts of banking, finance and interests:
✓ Learn to use online banking to check deposit balances
✓ Set achievable savings goals
✓ Use ATMs to deposit and withdraw money
✓ Open a fixed-term account to earn interest
Conclusion: Leverage the various options available to raise your children’s FQ
Through a combination of daily parenting methodologies, financial apps and children’s banking services, parents can start a conversation with their kids about money management as early as possible and utilize the best approach to raise money-smart kids and help them embark on their financial journey.
Developing children’s financial literacy is not as hard as one may think. Once parents find the right path to start the financial conversation with children and work on it patiently step by step. Every child can be an FQ prodigy!
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