When is the best time to start teaching your child about money? | Marvin Germo

When is the best time to start teaching your child about money?

By: Marvin Germo | March 25, 2014

Learning the art of investing is great but having the ability to impart that to the next generation is even more amazing.  I believe that our country is about to enter into one of its greatest days yet however for this to be sustainable education in investing should end with us but should extend to the next generation of market shakers and movers.

In line with that, I have invited ICON2014 Speaker, Rose Fres Fausto to share about “When is the best time to start teaching your child about money?”  Rose is the author of bestselling book Raising Pinoy Boys.  She was an investment banker before she became a full-time mother to Martin, Enrique and Anton To read her other articles go to www.RaisingPinoyBoys.com or PhilStar.com Author Archive.

Rose Fausto Family

When I throw that question to parents during talks and workshops, I get answers ranging from three to seven to teenage. I treat Financial Literacy as a journey and I think it’s best to start this journey really early on because it is a way of life.

So I encourage all parents to start the Financial Literacy journey of their child as soon as he is born. Open a savings account for him. That’s where you deposit the angpaos or cash gifts that he will receive from friends and relatives on his baptism, birthday, Christmas and other occasions. Anyway, these are his money and it’s best not to commingle his funds with yours from the very start. Since he is still a minor, open an account “In Trust For.”

Can you imagine how many Christmases and birthdays there are before your child starts asking about money? And when he starts asking wouldn’t it be nice for you to say, “Honey, do you know that you already have something saved up and invested?” This will set the tone of abundance in your child’s financial life. Just make sure that you are able to impart the correct values as you teach him about money so that this feeling of abundance is not confused with the feeling of undue entitlement. Entitlement means he can just use his money just because he has it and didn’t even have to work for it. Feeling of abundance is knowing that when money is conserved, invested well and respected, there will always be enough. And of course, this cannot be done in any great lecture but only by example from his parents.

Rose Fausto

As soon as your child learns to communicate, you can tell him that he does not have to spend all the aguinaldo and the birthday gifts he receives in cash. Make it a habit for him to automatically save and invest these gifts. If your child has godparents who regularly give him cash, encourage your child to invest these gifts in higher yielding instruments like fixed income investments and stocks. You may not realize it but your child has a higher risk appetite compared to you. He is still a minor and hopefully, you are the one providing for his needs until he becomes an adult. He has a longer holding period when it comes to investments.

When he goes to school and starts receiving cash allowance, instill the habit of setting aside a certain percentage of his allowance, say, at least 10% or 20%. Create a system that is regular and automatic, if possible. When my sons started receiving cash allowance, we gave them a “treasure box” where they put their savings complete with a small notebook where they recorded the amounts. When their cash savings in the box reached at least P500.00, they deposited it in their savings account. When their savings account balance reached way beyond the minimum balance, they invested in either fixed income or stocks. Early on they learned that they should not keep all their savings in low interest earning savings accounts.

As your child grows older, expose him little by little to your actual household expenses. You may show your utility bills to make him more aware about conserving water and electricity. You can bring him along with you when you do your groceries. Make a guessing game out of your grocery bill, restaurant bill, etc. When making purchases, explain to him your choices.

Money is an abstract concept and a lot of families use transparent jars or cute piggy banks to illustrate the concept of saving to their children. Some label their jars with Saving, Sharing and Spending to make it easier to understand for their young children where their money goes.

Remember that time is on your side when you start them young, so the earlier the better. To show the magic of compound interest to your child – i.e. how much he can accumulate by regularly setting aside money for saving and investing, go to Chapter 6 Magic of Compound Interest of www.RaisingPinoyBoyc.com. You will find an excel file which you can download for free. You can plug in your own values using your child’s actual savings and you will see the amounts he can accumulate at different age levels.

If you think you missed out on this “as soon as your child is born” timing, don’t worry because the next best time is NOW! So start now.

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