It still has to be said: money does not grow on trees
It was one evening last year when I received my first real warning of the potential dangers of not educating children about money matters. My son James, aged eight, was deep in thought in front of the computer in the corner of the room. My husband and I were both working on laptops.
Out of the blue, James asked a question which stopped both me and my husband dead in our tracks. 'Dad, what's your credit card number?' James asked expectantly, his fingers poised and ready over the number keys. On his screen was a half completed payment form, one which authorised a monthly debit from our credit card account for membership of a games website.
I tried to explain why he could not have the credit card number. 'It's not my money. The card lets me borrow money from the bank and if I don't pay it back, I have to pay them more and more each month,' I said.
His brow had furrowed. 'That's not fair,' he replied. He had thought the card was an endless source of money but where the money came from had never crossed his mind.
According to economist Minal Jain, it is not usual for children to see a credit card and think 'magic card'. 'Kids see parents using credit cards and think the money comes from nowhere.'
Jain, who runs courses teaching children and teens financial literacy through her company Leverage Education Services in Hong Kong, feels parents should recognise the importance of helping their children grow up into money-wise adults.
'Money management is a life skill but the problem is children don't learn it in school. It is also a difficult topic for some parents, who feel it's something their children will learn by themselves anyway,' Jain said. 'But the recent events have shown us some people don't.'
It is a view shared by many financial professionals in Hong Kong who believe money management, like the 'birds and bees', is something children need to know. But not all parents find it an easy topic. According to Neale Godfrey, author of Money Still Doesn't Grow on Trees: A Parent's Guide to Raising Financially Responsible Teenagers and Young Adults, some find the subject harder to discuss with their children than sex. A survey by the Hong Kong Institute of Certified Public Accountants (HKICPA) some years back found 37 per cent of 300 parents with children aged six to eight believed they were incapable of teaching children good money habits, with 70 per cent saying they needed help on the topic. In the lower-income group parent confidence was even lower
It was in response to this that the institute set up its Rich Kid, Poor Kid Programme, aimed at teaching children about money and helping parents do their bit to do so.
Rich Kid, Poor Kid ambassador Eileen Tam, a CPA and mother of two, said: 'Coming from an accounting background, I always think, 'How much do I have', before I spend. But this doesn't come naturally to children and even to some adults, which is why not many are comfortable teaching kids about money. But if you teach children good money habits, you can insulate them from making major mistakes later in life.'
The programme coaches children about the three S's of money - save, spend and share - and about bank accounts, and the reward one gets by way of interest in saving money.
'What I've found from the workshops, is that some kids don't have a concept of saving. They get HK$20 and spend it, and then go back to their parents for more,' Tam said.
'Parents may think as it's only a little money, it doesn't matter. But children need to be able to balance how much money they get and how much they spend and save. They need to try to spend less than they get, to understand the difference between needs and wants, and to save.'
One of the best ways to do this, says Tam, is with regular pocket money of a fixed amount. 'Giving them a little money trains them for their future life.'
Francesca McDonagh, the HSBC's head of personal financial services in Hong Kong, agrees. 'It's important for children to learn the value of money. Gaining knowledge about personal finances at an early age will enable them to make good decisions when they grow up.'
Parents can help children plan and budget, says McDonagh. This recession and how it came about is a good living example of the consequences of not having good money habits that parents can share with older children.
'There are some important lessons to be learnt from the recession,' McDonagh said. 'For example, the impact of overspending and overinvesting and having too little savings.'
Like HKICPA, HSBC has taken this message into schools with its Living Finance education programme which runs workshops for teenagers.
McDonagh feels children here are lucky in that parents are generally investment-savvy and endowed with the traditional Chinese virtue of saving. And, if parents do not have the confidence to talk money with children, they can turn to the internet and its vast resource of free accessible information, for support, she said.
Since that wake-up call last year, James' understanding of money matters has come on leaps and bounds with the help of a little parental guidance and from his own research on the internet.
He now knows what 'interest' is and even foreign currencies fail to faze him. During a recent trip to Europe, he was converting euros into Hong Kong dollars quicker than an online currency converter.
He has even mastered the concept of 'supply and demand' and 'profit' as he demonstrated one day in Greece over the summer.
He was playing shop in the garden when an anxious voice loomed from the bathroom: 'Did we forget to buy toilet rolls?'
Quick as flash, James disappeared and returned 10 minutes later with a bumper pack of toilet rolls bought from the village shop, which he separated and sold for a profit. My guests paid up out of necessity, and a mix of amusement and admiration for his entrepreneurial spirit.
Later, his tissue stock depleted, he calculated his profit like a true Hong Kong businessman and then dropped the coins one by one into a ceramic piggy bank like any other eight-year-old, leaving me to ponder if I had created a profit-hungry monster or a future millionaire.
GIVE POCKET MONEY
A fixed amount at a set time, without conditions attached. Start with a small amount and increase as the children grow older and show they can be responsible with money
TEACH THE VALUE OF MONEY
Give your children a realistic idea of value by talking about how much their spending money can buy. Let them know everything costs and that money is earned and does not grow on trees
WANTS VERSUS NEEDS
If your children need a new pair of trainers, but want an expensive brand-name pair, discuss with them the difference - this is key to teaching them to be financially responsible
PIGGY BANK VS BANK ACCOUNT
The traditional savings-box is a good first step to saving. As children become more mature, encourage them to open a bank account to learn the basics of banking
SPEND AND SAVE
Try two jars - one for spending and one for saving. Talk to your children about how much they can afford to put into each from their pocket money each week
Ask your children for a loan of one or two dollars to help you out now and again to show how their money can help others
Encourage children to plan what they want to do with their savings and check how it is going. But don't ask too many questions as it shows a lack of trust
REWARD WITH INTEREST
Offer to add a reward amount to their savings if they reach their target. This gives them the ability to delay gratification and introduces the concept of interest
Never offer money for chores they should do (homework) but encourage them to earn extra cash for extra chores (cleaning cars). This establishes a work ethic where money is a reward and not an entitlement
As children get older and show they can handle money, give them more control of their own budget. Octopus card works well here, preparing them for the real world of banks and debit cards