Cents and sensibility
Most parents understand the importance of establishing a home environment made up of daily routines that encourage children to develop the positive habits relating to food, looking after personal hygiene needs, and developing positive social relationships.
However, when it comes to money, too often the family routine involves parent-child battles over paying for candy bars or soft drinks, the latest must-have toys or even an older child's credit card statement.
'Our simple belief is that money skills are among the most important skills for a successful and happy life. The sooner the education starts, the more effective it is as it forms habits rather than learned skills. Building up good money habits enables children to grow up with a sense of financial responsibility, that will serve them well through their whole life,' says Winnie Cheung, chief executive of the Hong Kong Institute of Certified Public Accountants (HKICPA).
But parents often feel out of their depth when it comes to deciding what to teach their child about money, how to teach it and by when. In a recent Time magazine article, Dan Kadlec presented an outline of what children should know or be able to do as a set of benchmark behaviours relating to money.
He suggested that by the age of three, children should be able to identify coins. And by age five, they should understand the value of each coin.
By nine years of age, they should be able to give change, read price tags, understand the basic principles of a product-return policy and know how to make money by performing a simple work-like task. Children should also know the difference between needs and wants, and that saving will allow them to buy something better later.
Kadlec said that by age 13, children should be able to research product details, and make comparisons and sensible decisions about what product offers the most value. They should also be able to set up a personal spending budget and effectively operate a bank account with ATM card privileges.
There are a variety of materials and programmes available that can help parents ensure their children achieve these types of targeted behaviours. The HKICPA, for example, has taken a storytelling approach with primary-aged children by producing a set of books that includes two volumes written by Nury Vittachi - May Moon and the Secrets of the CPAs and May Moon Rescues the World Economy. The set also includes a companion guide book for parents, How to Raise a Money-Wise Child.
For secondary students, the HKICPA has developed a programme called 'Rich Kid, Poor Kid', which is presented by registered CPAs in secondary schools across Hong Kong. Its aim is to introduce the basics of money management and the right kind of money values.
Homage Consulting's Dr Christine Chow, who regularly conducts financial literacy seminars, suggests the use of stories as part of a range of online resources she recommends to parents during her presentations on how to teach financial literacy and responsibility to children aged six to 16 years.
Chow, an academic and investment consultant, says there are two common questions parents ask her at her seminars.
Foremost is how they can teach their children the value of money, while the second concern is how to inculcate responsible spending.
In answering these questions, Chow suggests parents follow three key points. First, they have to remember that gift money - such as lai see - is appreciated but not treasured. Second, children gain pride in earning their pocket money through actions that are positively associated with their individual interests. And third, that these actions teach children the value of their labour.
To illustrate these points, Chow shares with parents a personal experience about a good friend who wanted a pony in her teenage years. Her parents promised to pay for the livery, but their condition was that she had to wake up at 5.30am to clean the stable and contribute some effort to caring for the pony. Looking back, the experience not only helped her gain confidence and a sense of responsibility; it also kept her out of trouble during her vulnerable teenage years, as she had to resist the temptation of wasting her evening away because she had to get up early in the morning.
Chow also recommends that the concept of saving needs to be based on specific goals to be achieved within a given time.
'Saving without a purpose could become money hoarding. There needs to be a clear purpose and timeframe for a child's saving activities because at the end of the day, money is a medium to enable access to resources at a time we need them,' says Chow, who is also a member of the United Nations-backed Principles of Responsible Investment Academic Network.
Parents who would like to enrol their child in a structured course that focuses on teaching financial literacy skills may consider programmes such as Money Champ or Camp Millionaire (see box).
Money Champ is a financial management module for children aged five to 15 years. Course materials comprise a board game, theory book and home practice kit for parents to use with their child.