Teaching Your Children Money Matters by Rose Fres Fausto

It’s never too early to teach your children about money. Financial expert Rose Fres Fausto shares how parents can be their children’s effective money teachers.

Parents are the best teachers to their children when it comes to money behavior. You may not be confident about your own FQ (Financial Quotient—your ability to make sound decisions and actions in handling your finances), but your children will consciously or unconsciously acquire your money behavior.

Teach them to save up and be wise with their money while young—and learn other helpful tips as a money teacher from Rose Fres Fausto.

1. Open a bank account for your children as soon as they are born.

If you were not able to do this back then, do it now. Put all their angpaos, cash gifts, and other financial assets received in their account so that there is no commingling of funds from the start. You can do this by opening In Trust For (ITF) accounts for minors. When they start asking questions about money, wouldn’t it be great if you already have something to show them?

2. Be clear about the difference between needs and wants.

Needs are the things we can’t live without and wants are the things that are nice to have. Simple to define but the reality is that there is no universal way of categorizing needs and wants across families. You will have to figure out what these are for your own family and communicate them clearly to your children.

3. For young children, add books about money to your bedtime stories.

The Retelling of The Richest Man in Babylon is a story and activity book that you can read to your children regularly so that they will have a head start on the basic laws of money.

4. Have open and healthy communications about money.

Do not treat money as a taboo topic. In talking about money, always add the dimension of it being a tool to fulfill your core values.

5. Teach them the three basic laws of money.

a. Pay yourself first. This is teaching them the correct mindset about savings—i.e. it is not depriving oneself, but prioritizing oneself, especially for one’s future. Hack: Automate their savings. When giving them an allowance, direct a portion, say 20%, to their savings and investment account automatically.

b. Get only into a business that you understand and seek advice only from competent people. Encourage them to hone their God-given gifts because these will be future sources of income. Warn them against financial scams disguised as money experts.

c. Make your gold work for you. Make an army of golden slaves before you buy luxury. This is the lesson on delaying gratification. Shopping is fun but beware of the example you are showing your children. Tip: Buy luxury only if you can afford to buy 10 pieces of it.

6. Go beyond saving lessons and wow them with the magic of compounding.

Sometimes parents are too scared to invest their children’s money because they want to keep them safe. While it is right to keep their money safe, it is not wise to keep their huge cash gifts from generous grandparents and godparents sitting idle in savings accounts.

7. Warn them of the flipside of the magic of compounding debt.

This is a lesson for older children who may already be using their credit card or other loan instruments, easily obtainable online. Warn your children that a small interest amount here and there may not seem significant at first, but adding them up and compounding them may eventually become a huge burden that will saddle their financial well-being.

8. Teach them to prepare their balance sheet.

This might sound too much, but this personal balance sheet is just a simple list of your children’s assets on the left side, along with liabilities and equity on the right side. The balance sheet helped us in teaching the abstract concept of money to our young children, as it made them see something tangible that money is not only for spending but also for investing.

9. Convince them to take summer jobs.

During summer or other long school breaks, instead of just enrolling your children in all sorts of classes, encourage them to take on earning activities such as service-oriented jobs and small businesses. They will not only earn but also experience valuable character formation.

10. Cut their financial cord when they graduate from college.

It’s okay to let them continue living with you but feel free to cut their regular allowance. In some cases, your too-hefty allowance may discourage them from taking on a job with a starting salary lower than their allowance.

To read the full article, grab a copy of Modern Parenting’s special Holiday 2023 Print Edition—available on sarisari.shopping. Download the e-Magazine from Readly or Press Reader for more exclusive features and stories.

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