Monday 30 December 2013

Learn To Save From Young Before It's Too Late

Financial planning should start from very young, there is no doubt about that. 

We can't teach a young child how to earn or invest the money. What they should be taught is very simple - saving.

For me, saving is the most important part in financial planning, and is the easiest to learn. You don't need to have a high IQ to learn about saving. 

Saving skill is learned when we are a small kids, without we realizing it. If we miss the timing, then it may be difficult to save meaningfully in the future.

Nowadays most of our children are very "fortunate". They can get what they want because their parents "love" them very much. Whenever they want anything from a toy to McDonald, their parent will buy for them. Some kids even have a maid to serve them.

Some parents always want to give the best for their children. They don't allow their children to wear old clothes. They throw away old school bag even though it is still usable. They spend money without restriction in front of their children.

If the child grow up in such an environment, I think they can hardly learn about saving. When the child grow up into adulthood, it is likely that he will spend easily on unnecessary or luxury items, such as changing the smartphones every time the new models are released.

Even if you are not poor, you still need to let your young children know that money does not come easily.

It is common for every kids to ask you to buy them any toys they see. If you don't buy for them, sometimes they will cry. If you pity them and buy for them when they start to cry, then you are "finished". 

Children are smart, they learn that when they cry they can get your attention and anything they want. So they will keep on doing the same thing until one day you refuse to fulfill their wishes, they will throw a tantrum on you, screaming, scolding or even beating you, hate you and get angry with you.

So, parent should not let their children "controlling" them.

I believe that if we talk properly or discuss with children above 2-3 years old, they are able understand and accept most situation.

For example, if your child insists to buy a RM50 toy and you are reluctant to buy for him, what will you do? 

Some parent just ignore the child, pull their child away without talking much, some just say "No, lets go", some scold their child and say "you already got so many toys at home".

These action or words will not satisfy your child and thus they will feel sad and they don't like you. They don't understand why they can't have what they want. If this happens repeatedly, your bond with your children may be affected negatively.

I think the better way is to explain properly to the child. For example: this toy costs RM50, and we need to work hard for the money. RM50 can buy you food to eat for 10 days. If we donate the RM50 to other children in Africa who live in hunger, it will buy them enough food to eat for 10 days and this may save their lives. So do you want to spend the money on your toy or save it?

Of course when there is a chance, let your children throw some money into donation box. From this example, not only your child will learn to save, but also helping other people.

The best way to teach our children about saving is to lead by example. You just can't expect your child to save if you yourself is spending money like no tomorrow.

I am fortunate enough to have parent that basically don't spend a lot, especially my dad. He drove old second hand car, wore old clothes, old shoes, old watch and ate very simple food, sometimes to an extent that I think has gone overboard.

Though he is no more with me, I'm glad to say that I have certainly inherited this "saving gene" from him. 

So, teach your children to save and spend wisely before it is too late.