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The key to success in life is to start early. Be it at work or home, the proverb "the early bird catches the worm" applies well and keeps you ahead of the game. Isn't that the reason why you enrol your children in enrichment classes and coaching institutions? While helping your little one to acquire skills either at sports or academics is extremely important, we often overlook the necessity of financial literacy. After all, children, irrespective of their professions, will deal with money throughout their lives.

According to financial experts and studies, by the age of seven, most children would already have grasped how money works — in Malaysia, this is when they usually start handling their daily allowance at primary school.

In addition, their attitudes towards money should also be formed by this age. This means that if you want your kids to be prudent with money, you have to teach them its value as soon as they are able to count. Here are easy ways how we, as parents, can help our children kick-start their lifetime savings habit.

Want to teach your children to be more financially responsible? Here are 20 things you can do.

You can begin your money parenting style by teaching your child about earning. Children as young as two to three-year-old are able to start learning this concept. Did they clean their room or make their bed? Reward them for completing the chore. Even if it's a dime in the moment, inculcate the habit of earning in your child.

As your child learns about earning money and making a livelihood, they will realise the value of different things in life. Some need more money than others and that requires you to save your earnings. Now would be a good time to bring that piggy bank home for your kids to slide in the coins. With older children, use this opportunity to open a bank account for them. It will not only help them in saving their earnings but also help multiply their savings. With a joint account, you can also keep a tab on how their money is growing and where they spend it on.

Speaking of which, your child's first financial decision would be how they choose to spend their money. Kids who've earned that money will be more mindful of how they spend it as opposed to things being handed to them. It teaches the importance of hard work. It's not necessary that your child needs to be smart every time they spend their money. They may have been saving up for a new pair of expensive sneakers or maybe a video game - things that may not seem as ‘wise’ financial decisions, but allow your child to make those decisions and learn from them.

This brings us to another aspect of the money parenting style that you need to incorporate – your child needs to learn the difference between needs and wants before making a purchase. As a parent, educate them about the differences between needs vs wants. You then need to trust their instincts and let them make that decision - whether good or bad. After all, if you decide to make them financially responsible, your child also needs to learn about the consequences of their actions.

The great thing about electronic money is that it is traceable, so you and your little one can keep track of where they spend their money. Instead of using cash, transfer your child's allowance to their bank account and then encourage your child to use electronic money instead of cash. This not only creates an electronic trail but also helps your child reflect on how they chose to spend their allowance that month. Use this opportunity to identify purchases that could've been avoided and how that money could be saved for something better.

Financial literacy isn't merely about teaching your child to earn more, but also about ensuring their ability to take credit and pay it off. As your children grow older, taking credit in the form of an education loan, home loan, personal loan from time to time will be an integral part of adulthood. Preparing them for the same can begin now. Your kid wants those new shoes but doesn't have the money to buy them immediately? Offer them credit, but at the behest that they pay back within a stipulated time. It would be a fun way to teach them about how the credit system works and can be empowering if done the right way.

Did you know that Generation Z has the lowest average credit card debt of all current generations? While that's great, it's also because this generation has seen parents in debt first-hand due to recessions. With the next generation, electronic money can make things intangible with no actual money to part ways from. That's why it is significant to teach them about how debt works and the consequences of taking too much of it. If you have any personal stories in this regard, don't be afraid to share it with your child. Additionally, don’t forget to keep a track of their spending habits. This is particularly true if they have a credit card of their own or are an authorised user of yours. Make sure your child understands not to bite off more than they can chew when it comes to managing money.

To avoid falling into debt, a great place to start would be to create a budget. Ask your child to make a note of all the expenses they've made throughout the month, and then plan the next month accordingly. For older kids, maintaining an excel sheet can be the way to go. There are multiple apps as well that allow you to record your monthly expenses and provide a detailed report on where your hard-earned money was spent.

If you are anything like this writer, then your experience of going to the bank can be intimidating. Whom should you speak to? What documents do you need? How do you fill that form? All these questions can be harrowing if you do not have prior experience. That's why you should start early when it comes to banking and its services. With early and mid-teens, let them go to the bank for deposits and withdrawals. Include them when you need to fill forms or let them do it under your guidance. Also, teach them about how interest works and how it can help multiply their earnings or increase their debts.

Your kid is smarter than you think and also a fast learner. So, while your financial literacy started much later, avoid that mistake with your child. With money parenting style, teach them about different avenues of investments. For instance, simple options like opening a fixed deposit or a recurring deposit is a great way to teach them about multiplying their money. You can also introduce them to stocks, bonds and now even cryptocurrency. Do remember: the first step towards investing money is to learn about the risks and that's what your child needs to do. Let them do their own research and come back with questions. You can always guide them.

When teaching your children about money, you should set limits to make sure their mistakes are correctable. Set limits like the amounts of money they can invest without hurting their savings or other investments. Setting a limit will help them gain confidence when it comes to handling money with more realistic goals. At the end of the day, you are teaching them to be financially independent rather than making a quick buck.

While parents are the guiding light towards the child's financial literacy, they also need to understand wrong decisions and their consequences. That's why, allow your child to fail from time to time. If they choose to spend too much on a game or even food in a single day, which results in them not having money for the rest of the week, they need to learn how to deal with it.

Not every home has its finances sorted perfectly. Or, at least there will be challenges related to money from time to time. Don't keep your kids in the dark about it. Kids should know about any financial hardships that the family is going through. Of course, this isn't about burdening your child about debts that you owe, but using it as an opportunity to teach them about not making the mistakes that you made.

It was incredibly naive of us to not know much about taxation while growing up. Kids need to learn about the importance of filing taxes and a basic idea of how to do it. Not just parents but schools should make it an active part of the curriculum, especially for kids in the higher classes. Every earning citizen in nearly every country needs to pay taxes and there's little we do in this regard. You can ask your child to be a part of that process the next time you are filing taxes.

Make sure your child develops the habit of having an emergency fund from which they never take out money. It could be a second bank account or a piggy bank at home that remains untouched with only deposits. If they feel tempted, show them the larger picture – the money they are saving and how it will help them later in life. This aids your child in learning more about managing their funds and saving them for rainy days.

The secret to a debt-free life is investing in the right place at the right time. And this requires having the right knowledge. That’s why, teach your kids to start identifying potential investments early on. This is particularly important for older teens looking to secure an education overseas, or those who want to enrol in expensive courses. Instead of taking an education loan, the right investment with your guidance can help them pay off their tuition fee. The key habit here is to look at the larger picture and save according to the goal in mind.

Older kids can take part-time jobs and contribute to their income. Encourage them to start developing a skill they are interested in, which may or not become a potential career later on. In either case, a part-time job or a side gig will teach them about entrepreneurship, money management and balancing commitments at school and work.

When your child starts making a decent income, it’s time to teach them the golden 50/30/20 rule. This is the ideal way to make sure you have better financial security in the long run. This includes spending 50 percent of your income on needs, 30 percent on wants and 20 percent on savings. The concept is a basic one and you can start teaching it to your seven-year-old if you like. It’s the rule that will transform their financial decision-making abilities.

If you want your kids to seriously start their financial literacy, you need to create the right environment at home. Share about your savings and what you are saving for. You can also create a joint saving account for something new like a TV or home appliance where they can make a notable and tangible contribution.

Do you think your child is already 10 years old so he’s late to start learning about financial literacy? You’re absolutely wrong, because there is no ‘perfect’ age to learn about it! It doesn’t matter if you haven’t done it yet, you will still be at least a decade earlier than several other parents. Some children will only learn about financial literacy after entering adulthood, and it might be overwhelming. You are still better off this way.

What Happens When You Don't Teach Kids About Money

While children can learn to be financially independent and responsible, kids who aren't taught such values tend to exhibit these problems.

Bad decisions around money will only cause your child to be financially dependent on others including you. Poor money skills attract debt and won't allow them to grow in life.

Lack of money can be a contributing factor towards low self-esteem. Some kids may start equating their personal worth by the figures in their bank. As a parent, you need to ensure that your kids have a healthy relationship with money.

Alternately, too much money can also lead to inflated pride that is equally bad in children. Your child needs to learn to derive happiness from moments and not money itself.

Bad financial decisions can attract too many liabilities not just in terms of money but in life as well. For instance, ensuring a car is serviced on time and has its parts replaced will save you from big repairs in the future. Conversely, someone who chooses to push their vehicle to its limits is just attracting that massive repair bill. Similarly, by not paying EMIs and debts before the due date, they are only attracting higher penalties and more debts in the process.

Be it at the casino or the stock market, the greed to make a quick buck can plunge someone into gambling and losing it all. While calculated risks are understandable, you need to teach your child about the perils of gambling in the household.