FINANCIAL literacy is the knowledge and skills to manage money; it not just about budgeting and calculating it.
Arus Academy co-founder Alina Amir says there is enough evidence to show our behaviour towards money is not based on intelligence but on value systems and past experiences. Arus Academy is an education social enterprise that focuses on financial, media and information and digital literacy, as well as global citizenship education.
“In many ways, parents teach their children about money explicitly and indirectly. Children observe how parents spend, what they say about money, even how they react to money topic when it comes up,” she says.
Alina says children as young as three can already identify money and by four, they understand the concept of money – what adults use to buy something.
Here are seven ways to impart money lessons on children:
Play imaginary store and restaurant
One of the first things parents do with their children is play. And one of the best parents-children playtime activities is role playing, which is an effective way for kids to make sense of the world around them.
“Children love to imitate running their own imaginary stores and restaurants and parents should join them. Paying and counting change during the activity can help them understand how money is used,” Alina says.
Always keep money in a safe place
Parents should create small habits like keeping money in a safe, specific place. Do not leave coins everywhere in the house. By keeping money safe, parents are sending the message that money is valuable and should be kept safely.
“It also teaches young children to identify money in its cash and coin forms while reminding them to take care of it well,” she says.
Teach kids skills to save and generate money
Teach your children chores and skills that can help them save money in the future, like making their own meals. It is also good to encourage them to engage in profitable hobbies like arts and crafts, photography or video editing and designing apps and games, for example. These services may one day help them generate income.
Talk about savings and emergencies
As children grow older, they will receive pocket money from their parents. At this point, you can talk to them about saving and emergencies.
“It does not always have to be an explicit lesson on money, but the skills and values that can help them in the long run, whether they have a lot of money or not. It is also the right time to get the children started on charity work to help them inculcate empathy and give to the less fortunate,” Alina says.
Have short-term savings for family activities
Parents can also have a collective family piggy bank for everyone in the family to contribute to. The fund saved is to be spent on family activities like a family trip or a movie night.
“Setting a strong family money culture is important. It helps children see that they can also contribute, and that the family is making decisions together,”
Teach delayed gratification
It is important that parents teach their children about the value of setting goals, delayed gratification and thinking critically about the world and the environment around them. Be honest about how the family makes decisions when money is involved.
“Teach children to think critically if something is worth buying or it is out of reach and the tradeoffs when we choose to buy something. Explaining how purchasing decisions are made is important for our children to understand that thinking is required whenever money is involved,” she says.
Teach children money requires effort
Children should know that nothing comes free and it takes effort to make money. These are values we want to inculcate from young so that when children deal with money – earning, spending and investing – they have the ability to make the right decisions because they already have the right values and skills.
“This will also help them from falling for scams and the unnecessary influences by peers or advertisements. It will also make them financially confident instead of buying material items for social validation,” she says.
A study conducted by Global Financial Literacy Excellence Centre (GFLEC) in 2014 found that only 36% of Malaysian adults were financially literate, while a survey by the Paris-based Organisation for Economic Cooperation and Development (OECD) found 13% of respondents in Malaysia rated their level of financial knowledge as very low.
In Malaysia, Financial Education Network (FEN) has more alarming numbers as published under the Malaysia National Strategy for Financial Literacy 2019-2023.
It indicates that only 38% of Malaysians can relate the effect of inflation on their own purchasing power, while 92% of Malaysians are more comfortable having deposit products against having investment products.
In its five-year road map, this National Strategy has five strategic priorities and the first priority is to nurture values from young.
The action plans focus on financial education for preschool, primary and secondary students, parental groups and the community, with the aim to educate schoolchildren with basic financial knowledge and skills while inculcating good financial values as a foundation for financially responsible Malaysians.