Photo by Fabian Blank on Unsplash

It seems that many Filipinos are not well-informed when it comes to financial literacy. While it’s never too late to learn, the best way is to start young and it starts with the kids. As soon as kids learn how to count, it’s best to start educating them on how to manage their money.

Here are some ways you can teach them:

Discuss wants vs. needs

Teach the difference between wants (something you desire) and needs (a necessity to survive or complete a task). When kids understand the difference, they can make informed decisions on when to save or spend their money.

Involve them in small discussions about money

Many Filipino families find it rude and crass to discuss money. This, however, causes family members to become scared of the idea of handling money. It can also lead to resentment and family rifts because no one knows where the money is, how it is saved or spent, etc.

Discussing money should never be scary. The earlier you discuss money with kids, the better. When doing the grocery, moms can bring their kids and show them the prices of basic goods. When eating out, take your kids to the cashier and even let them to get money from your wallet to pay for the food.

When they’re a bit older, you can include them in bigger money discussions like tuition fee, household income, etc.

Being open teaches your kids that there’s a price for everything and that you have to pay for these goods. You also don’t inadvertently plant the idea that food or things just come from nowhere like it’s magic.

Give them an allowance

When your kids start schooling, give them a weekly allowance. Even when they have ‘baon,’ give them a small amount to handle. The rule should be simple: the money only comes weekly. If your child spends it all in just one day and then he wants to buy something the next day, parents should not budge and reiterate that your kid should wait next week for his new allowance.

If your kid wants to buy an expensive toy, this means he needs to save his weekly allowance until he has enough money. This way, he learns that money is something you earn.

Open a savings account

Banks offer kiddie savings account to teach kids the value of saving money. On your child’s second or third year of having an allowance, you can level up his financial literacy by opening a kiddie savings account (preferably one that comes with a passbook). He can see that his money is growing (interests) and, at the same time, he sees the tax deduction (withholding tax).

As the cliché goes, there are only two certainties in life: death and taxes. As early as now, kids should learn that we need to pay taxes for everything.

Act as creditor

When your child wants to desperately buy a big-ticket item and just can’t wait to buy it, make a deal with your child by acting as a creditor. Under this agreement, you will lend him money but he agrees to pay you every week until his loan is fully paid. You can even stretch this by imposing a minimal interest. He can pay it by setting aside a portion of his allowance or he can do odd jobs around the house or come up with a small business.

This arrangement helps him understand how lending works in the real world. At the same time, he also sees that purchasing expensive items may cost him more than the price tag. It also teaches him to live beyond his means.

Teach how to invest

When your child is a little older, you can show how investing works. You can open a mutual fund or money market account so he learns the value of long-term planning. You can both agree that the account is for a long-term goal like college fund or to buy a car. He can add more money to invest and watch it grow or even decline. This also teaches him to know what his risk appetite is, how much he’s willing to invest and how much he is willing to lose. More importantly, he will know the value of compounding interest.

Teach them how to make money

They say no one ever becomes a millionaire from being an employee. Teach your kids that there are many ways to earn money. It can be from doing odd jobs around the house, making and selling something, showing off his talents, among others. The point is that there is no single way to make money and it’s up to him to utilize his talents to earn money.

Be a good example

It goes without saying but parents should set a good example to their kids. If your kids see you squandering your hard-earned money, they are likely to follow your example. If they see how prudent you are, then they will pick up on that behavior and be prudent, as well. You, after all, is their first and most trusted teacher.

Teaching kids how to be smart about their finances start with small steps. These small steps accumulate over time and they end up to be financially smart and financially independent individuals.


Roche Leonor

Roche Leonor has been a corporate communications and digital marketing manager for more than 15 years. She occasionally holds public workshops on social media and digital marketing management. She is also the daughter of a retired sea captain.