Money Management for Kids

As parents, we often struggle to teach our children the concepts of money, value, savings and investing. These are some frequently asked questions on this topic answered by Patricia Koh, Founder-Director of Pat’s Schoolhouse. Patricia has more than 35 years of teaching and nurturing young minds and is a highly-respected early childhood educator in Singapore and beyond.

Q) Why is it important to educate children about developing good money habits - becoming savers and investors?

Concepts such as ‘savings’ or ‘investments’ are rather abstract for young children. I would begin by teaching simple habits such as:

• taking care of their belongings so that they do not end up losing or damaging them
• treasuring the things that are given to them rather than throwing them out and buying new ones
• recycling materials and resources so that they learn to protect the environment
• storing food properly if they do not wish to eat them so that they do not go to waste

Q) Is it becoming increasingly difficult for parents these days to teach about savings, when their kids are bombarded with advertisements encouraging them to buy toys etc?

Most advertisements are targeted at parents with young children. It is therefore up to the parents to decide if they want to buy them.

Most kids have little influence over their parents except when they are brought to the toyshops to look at the ‘amazing’ toys they are attracted to. It is then that children are tempted and will act out the “I want!” scenes.

Do not take your child to look at a toy if you have no intention of buying it for him.
Also do not take him to shop for a toy for another child. It is difficult for your child to accept the harsh realities of budgeting at a young age.

Q) What would teaching young kids money management skills achieve? E.g. Would it be math skills (counting money), community skills (supporting those in need) or social skills (ability to talk to others about money)?

I suggest parents focus on developing the character of the child rather than working on increasing his cognitive skills such as math or language. These skills are often introduced at school.

I would therefore focus on his abilities to:
• care for things and look after them well (learning to save)
• treasure the things that are tied to memories and great experiences (investing in what’s important)
• being creative in using and re-using materials (saving for the future)

Q) Should preschoolers get an allowance? If yes, how much would be appropriate.

The amount is not as important as the consistency and the ability to keep to the decision made.

It will also depend on what items we are allowing our children to buy on a shopping trip with mummy or daddy and how it will cost.

If we are thinking of letting our children buy little treats when entering a small store, then nothing more than a few dollars should suffice.

As parents, these money decisions are within our control so we need to start right giving them what they need without feeling guilty and yet setting the right example for them to follow.

Q) Should I give my kids rewards in exchange for chores or homework done? Why and why not?

The rationale for giving rewards should be because we want to do it and not because we have to do it just to please the child.

If that is the case then it is fine to reward your child when you feel that he has done well or made great improvements or when he has been extremely cooperative and well-behaved.

However, the rewards or treats must be communicated after the performance and not before. If it is done before, it will seem like a ‘bribe’, as if we need to think of ways to get our children to do what needs doing. It should also be given only when very special efforts have been made and they are indeed deserving.

Rewards can come in the form of special treats like a walk to the store to pick up the desert for the family to celebrate good behaviour or performance. If we make a big deal out of something small, children do appreciate the effort and try harder the next time to meet his parents’ expectations.

But please remember to point out what our children are doing right rather than when they make mistakes. This way they will remember what you want them to be doing most rather than what you are not happy with.

Q) When is the best time to start teaching children money management skills and why?

Preschool children can understand simple concepts such as sharing something with someone, saving something for later and taking care of their personal belongings.

Older children from 5 or 6 years can start to understand the value of money and the cost of products and services. It would make more sense to introduce the concept of money after children have been introduced to the concepts of ‘more or less’, ‘counting’, ‘recognition of numbers and signs’, ‘simple addition and subtraction’, ‘the actual value of money’, ‘buying’, ‘selling’ and so forth.

Q) What are some activities that parents can engage their children in to lay the foundation for a moneywise kid and what are the skills they can pick up from here?

2 to 3 years old  - Fun with Rote Counting, Sorting and Ordering
• Walking up steps and counting them
• Clapping and counting
• Jumping up and down and counting
• Putting things in the right places
• Sorting clothes, toys, books etc
• Stacking up boxes, containers etc

3 to 4 years old – Fun with Meaningful Counting
• Number Rhymes – counting forward

1,2,3,4,5
One I caught a fish alive
6,7,8,9,10
Then I let it go again!

• Number Rhymes – counting backwards

10,9,8,7,6,5,4,3,2,1,0 BLAST OFF

• Number Rhymes - Subtraction
5 currant buns in the baker’s shop
Round and fat with a cherry on the top
Along came a boy with a dollar one day
He bought a currant bun and he took it away
How many currant buns do we have left?

4 to 5 years old – Fun With Shopping
• Making a shopping list for ingredients to bake a cake
• Shopping - comparing prices and looking for items which may be on sale. Introduce vocabulary such as, “How much does this cost?”, “This is more expensive than that”, “Can we use this cheaper one instead?”, and so forth.
• Organising the ingredients for baking – sorting them in the order that they have to be placed in the mixing bowl.
• Describing the proportions such as: 1 egg, 2 tablespoons of sugar, 3 slices of butter and 4 cups of flour.
• Describing the time it will take to bake the cake and what we can do while waiting for the cake to be ready. Such good habits will help children to use time wisely.
• Using stories such as: Caps For Sale to illustrate the point

6 to 8 years old – Concepts of money and starting a savings account
• Shopping experiences to include spending within their means. We can determine how much we want to spend on a toy and let your child know. Set a budget the range that is reasonable to buy a useful item. Shopping could be a weekly event.

• Starting a home savings account
Start your child saving a small amount each day in a Piggy Bank. Even if it is 10 cents a day, it will show him the power of addition and accumulation. We can increase that amount to a dollar a day when he is older and keep that aside for something special.

• Saving experiences can include putting away pocket money in 3 different boxes at the start of the week. The child can choose to place his weekly allowance either in:
Box A – For buying a toy, a game or a book he likes
Box B – For saving to buy something bigger
Box C – For sharing with someone who may need something but cannot afford it

• Starting a bank account in your child’s name and bringing him to the bank to deposit his savings.

Q) Please provide some examples on how Pat’s Schoolhouse teaches money management skills to young children? What are the objectives of these activities?

Our Math Curriculum is developed progressively over 5 years to ensure the development of number concepts early. Early Numeracy Skills are introduced through the use of materials that children can manipulate and experience. It is important to start from these concrete experiences before moving on to the abstractness of numbers and symbols.

A child may be able to parrot after the adult and count in the right sequence, “one, two, three, four, five” but they may not have an idea of “number conservation” or ‘number correspondence”.

Children will have many experiences making comparisons such as, “more than’, ‘less than’, ‘are there enough?” or measurement concepts such as, 'taller than’, ‘bigger than’, ‘higher than’, or longer than’.

The concept of ‘Money’ is usually introduced as part of the shopping activities we plan for our children. Such experiences are meaningful and practical and children get to understand what they can buy with $5 and what they can do to get the most out of their $5.

Most of the concepts that we introduce to children are through children’s literature. Here are some good examples that teach economic concepts well:

Books About Money

How much is a Million?                                                                 
By David M. Schwartz Marvelosissimo

The Mathematical Magician demonstrates the meaning of a million by showing his friends that it would take 23 days to even count to a million and that a goldfish bowl large enough to hold a million goldfish could hold a whale. This humorous and fun book is great to read as it helps students conceptualize the immensity of numbers as well as look at numbers differently.

A New Coat for Anna
By Harriet Ziefert

At the end of World War II, Anna needs a new winter coat, but her mother has no money. They use valuable possessions to barter for the goods and services needed to produce the coat.
This book helps children understand that before money was invented, people traded to get the things they needed. Children can then be encouraged to bring in something they would like to exchange for something more useful to them.

Round and Round The Money Goes
By Melvin and Gilda Berger

This is a brief history of the development of money and the economy. 
It’s a great resource for teaching children about the flow of money, earning, saving, spending and giving. It also provides clear information about how money is made.
Books About Consumer Decision

The Big Buck Adventure                                                                  
By Deborah Tobola

A little girl figures out what she can get with her dollar in a candy shop, a toy store, a deli and a pet shop. This is a good book to read before we take our children on their shopping experiences as it focuses on making decisions when funds are limited. So they have to figure out what they can spend with $1 or $5.

Books About Saving Money

Alexander Used To Be Rich last Sunday
By Judith Viorst Alexander

This story is about a little boy who tries to save a dollar that he received from his grandparents to buy a walkie-talkie, but his poor spending decisions resulted in a situation where he had no savings. This is a great story to talk about impulse buying, a common consumer behavior. Children will learn to evaluate their decisions and monitor their spending.

A Chair for My Mother
By Vera B. Williams

This touching story reveals the importance of teaching kids about saving their money over a period of time so that they can spend it on something really worth buying.

Money Management for Kids.pdf