Teaching Kids About Money
What is your earliest memory about money? The typical answer dates back to primary schools days when you first get pocket money for school. During my time, as a 1980s kid, that was $1.00 a day and we could get a bowl of noodles and one of those coloured drinks for that price! Our first understanding of the concepts of saving and spending was probably when we wanted to buy a new pencil or eraser and had to save up some of that $1.00 to buy it. Did you have any other memory about money?
How A Sim City 2000 Changed My Life
For me, it was when I was 10 years old. We had a 286 DOS-operated machine with 2MB of RAM (yes, 2MB). Back then, it was considered pretty decent. As a kid, games became boring fast. But to buy a new game would cost me $10-$25 and where do we get that money?
So I had my eye on a new game – Sim City 2000. I knew it cost $10 to buy it and I also knew I didn’t have that. My first resort was of course, to hustle mum to buy it for me. Little did I know this simple desire for a new game was to set me on a path of learning.
You are not entitled to what you can’t pay for
As you would have guessed, my mum refused to buy me the game. “If you want it so badly, think of how to get it yourself.” While I sulked and whined, it was, on hindsight, a great decision on her part. If she had given in to me, I would have found it too easy to get anything I want, and feel entitled to more in future.
Left to my own devices and simple 10-year-old mind, I came to the only option I could think of. It was going to be two weeks of starving during recess so I could save up for the game I wanted.
Lesson learnt: Do not demand the prize if you‘re not willing to pay the price!
After two weeks, I had saved the $10 for the new game and happily trooped down to get my hands on the prize. Alas, when I got home, I realized that the game required a 4MB RAM to be played! I was angry and disappointed, and went back to the shop to give them a piece of my mind.
The guy at the counter just replied nonchalantly, “If you still want to play the game, I can sell you the extra 2MB for $200. If not, I can give you a refund.”
While I went back to the shop to demand some “fairness”, all I wanted was to play the game. Now the stubborn streak in me refused to give up. I remembered walking out from the shop, one hand clutching my game, one hand empty and my brain working overtime to figure out how to raise $200. That’s close to one year of starvation during recess!
Learning about the value of work
Long term starvation was not a good solution. This time round, I went back to my mum, not to ask for a sponsorship but to seek her counsel. She thought about it and offered to pay me for washing her car and doing other chores, for $1-$3 each time.
Well, this is better than starving. 4 car washes and that’s enough for a new game. I didn’t know it but this was my introduction to the idea of value exchange and the concept of labour.
Lesson learnt: Saving is good but earning beats saving. Work for what you want, don’t just stretch out your palms.
While the earning process was laborious and actually took time away from playing games, I started to understand the satisfaction of earning money for work you do. During the process, I also learnt about hiring and marketing. I decided to hire my brother to help in car washing and paying him part of the money. With more hands, we were able to wash more cars and extended the service to our relatives. In addition, work is more fun when you work together!
Seeing What Others Miss
Weeks passed, the money was accumulating slowly (people don’t need their cars washed all the time) and the waiting was killing me. I started to rack my brain again.
On a trip down to the shop to check out new games, I noticed how people had to wait while the guy prepared their purchases. I saw him pull out the disks from the game box they selected, enter it into the computer drive and after a few minutes, he gave them back. Something lighted up in my head! I observed him closely one more time, and that day, I left the shop with a new game and a box of new Verbatim 5.25 disks.
I brought my new game to school the next day and as always, my classmates queued up to take their turn at it. I announced, “Do you all want to play it at the same time? Then we can compete! I can get it for you all at a discount.”
And that was how I created a new market and started my trade of selling copies of games*. Almost everyone saved up to buy the game from me. Word got around and I received multiple orders of the game and subsequent new games that I showcased after computer class.
Lesson learnt: When you don’t get it easy, you start to use your brain and see opportunities.
In 6 months, I was the proud owner of a 4MB RAM. Sim City 2000, here I come!
*Disclaimer: Words like copyright infringement and piracy was not in my limited vocabulary then. Eventually, my booming trade caught the teacher’s attention and I got summoned to explain what I was doing. Dad instructed me to cease operations.
Inculcating Money Habits and Mindsets From Young
My story is not intended for purposes of encouraging kids to go think of ways to make money to buy games. It is to show how we are subconsciously taught about money from young. Like the book “Rich Dad Poor Dad” said, we get educated in school to gain scholastic and professional skills, but we don’t get educated about money. Given how important financial skills are to navigating life, as parents, we can teach our kids important financial lessons.
Research says that kids’ money habits are formed by age 7. So it is crucial that we take advantage of every teachable money moment.
Some of the lessons I mentioned in the story are:
1. You have to pay the price for what you want. You are not entitled to anything and you may have to wait to buy something you want.
Have your kid set a goal, such as to buy something he or she wants. Make sure it’s not too pricey such that they have to save up for a year or longer. The idea is to get them to recognize they have to save up for a goal. Come up with a program to help them reach their goals.
2. You can work for what you want. If you cannot save enough, earn more.
Get your kid to think about what they can do to earn money. Give them a little prodding and leave them with their creativity. You'll be surprised at what a child's motivation can come up with! Of course, as was learnt from my story, remind them to always work within legal, regulatory boundaries :)
Then create three jars – labelled “Saving,” “Spending” or “Sharing.” Every time she receives money, whether for doing chores or from Chinese New Year, divide the money equally among the jars. Have her use the spending jar for small purchases, like stationery. Money in the sharing jar can go to buying someone a gift or donating. The saving jar can be buying what she had set her goal on.
Other valuable lessons also include:
3. Spending money is a choice
Teach your kids to make wise choices about spending, because money is not infinite. Engage them in some financial decisions. For example, when going grocery shopping, allocate them $5 and have them make choices about what to buy, then taking the chance to explain about their choices. “Is this something we really need?” or “Would this same item cost less from another brand?”
4. Money is a tool and resource, both to achieve what you want and to help others
Don’t leave your kids with illusions about the power of money nor make it scary. It may make them act selfishly with money. Help them develop an abundance mindset and empathy from young by learning about giving.
You can get them to decide what portion of the money from the “sharing” jar can go to a charity fundraising or donation drive. Explain to them how the money they kept away can help others. Even $2 is enough.
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There are some financial literacy programmes targeted at children you can check out:
PlayMoolah: www.playmoolah.com
MoneyTree: www.moneytree.asia
OCBC Might Savers: www.ocbc.com/personal-banking/accounts/mightysavers.html (they even have an app for kids to learn money management from)
