10 Tips on how to teach children financial planning

I have two children who are teenagers. I would like to share how I teach my children financial planning skills such as budgeting, buying items value for money, insurance, estate planning, forex and purchasing power parity.

Tip #1 – Financial planning cannot be taught in a classroom style

Financial planning is actually a very dry subject. It is not possible for parents to teach this subject in the way physics or chemistry is taught. In fact, most adults are not keen in about financial planning and this is the reason why the majority of Singaporeans are unprepared for retirement.

My son’s secondary school taught financial planning when it invited an external vendor to conduct lessons for the school. The outcome of the course was a disaster. My son and his friends appeared to have learnt nothing. The trainer demonstrated to the class on how to do budgeting by showing a sample cash flow statement. When the students were asked to do their own cash flow statements, my son had only one entry for the expenditure section: $10,000 for games!

Teenagers at that age are not interested in allocating budget for tuition (which they prefer to do without), food (because there is always some snack at home which they help themselves to when they are hungry), etc. They will only allocate budget to the things that are important to them. So if gaming is important, the entire budget will be allocated to it!

Therefore, I do not have any formal session with my children when come to the topic of financial planning. I teach them financial planning through life events which they actually can experience by themselves. The technical jargon is to teach during those “teachable moments”.

Tip #2 – Use primary 5 maths for CPF

When my son was in Primary 5, he had a math question he did not know how to solve. When I saw the question, I wanted to laugh! Here is a picture of the question:

The teacher must had explained what ‘CPF’ meant but he must have heard wrongly and wrote ‘Central President Fund’! So this is a teachable moment to explain what CPF really means. It was not difficult to explain what CPF meant since there was some calculation involved.

Tip #3 – Keep budgeting simple

During a school event, one parent complained to me that her son was unable control his spending. When I asked her for more details, I realised she made budgeting too complicated for her son. What she did was to give her son an allowance every month. But what she did wrong was that the allowance was meant to cover a large range of expenditure including stationaries, school textbooks, food, transport, entertainment, etc. Her son was Secondary 1 at that time.

You see, teaching budgeting must be age appropriate. Budgeting involves higher order thinking. A Sec 1 teenager is too young to handle such complicated budget.

The way I teach my children budgeting is very simple:

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