How to let children build up a correct cognition of personal finance baffles many parents. Children's education and financial advisor, Mr. Guan Xian-bin creates several sets of methodology to teach how the children could create their own financial plans so that the children could understand money in the world in a systematic and progressive way. The four systems cover from the best way to use their pocket money, to establish a correct cognition of money, to the establishment of financial integrity, so that children could master the money in stepwise.
Guan Xian-bin points out that many parents would encounter the decision of how much pocket money should be given to their children, and how to teach their children to make good use of pocket money and other related issues. He creates a new set of methods to deal with the financial learning problems of the children.
1. Amount of pocket money according to the attending grade of classes
Guan Xian-bin points out parents can consider their own financial position, the actual needs and self-management ability of their children to decide the amount of pocket money to be paid. According to the attending classes, the smaller P.1 to 3 students may have 2-5 dollars per day, given their transportation and meal expenses are paid by the parents, so the purpose of this small amount of pocket money each day is to help start training the children the money management skills.
For the P.4 to P.6 students, the average monthly pocket money may be around 300-350 dollars. Whether the allocation of this sum on weekly or monthly basis will depends on the finance management ability of the children and to provide an effective training we need a sufficient amount of money. The parents have to make it clear that the pocket money given has already included the purchases of extra-curricular books, stationery and toys and so on, parents will no longer pay for extra child "wanted" items.
2. Use "721" distributing rules of money
Training the children to make good use of pocket money, Guan Xian-bin first developed the ratio of money allocation of "721" approach for the children, that is, 70% for basic needs and consumptions, 20% savings, 10% for non-essential consumptions. As the children grow up, the "721" can be adjusted to "622" or "631" ratio. Guan Xian-bin says that parents should use an encouragement approach to ask the children to adopt this apportionment method, because if this was carried out under strict supervision, it will only make the children lose interest on savings.
In addition, parents can ask children to write weekly financial reports in order to let them understand their own consumption patterns. In the weekly report, you can include the week's income (including pocket money, in particular, incentives, etc.) and expenses (including basic consumptions and non-essential consumptions).
3. 8 directions of using money by age
The most important part of the financial education for the children to establish a correct cognition of money, "The kids may not have the ability to distinguish ‘needs’ or ‘wants’, so according to different age and maturity to educate them the 8 directions, that is, awareness, earnings, savings, controls, expenses, protection, investment and share the money."
Guan Xian-bin thinks though the 8 directions of money are somewhat elusive concepts, but in the process of teaching children about money, the use of these directions can be structured through living examples and habits. If the children began to have pocket money, they can also teach them how to save, spend and control. And as the kids grow up, they can learn investment skills.
4. 6 ways to nurture financial integrity
Guan Xian-bin advices that parents need to cultivate the children's financial integrity. Financial integrity of wealth refers to the establishment of children's correct attitude and desire to exercise restraints, and proper risk management, and always work hard to achieve financial goals. He suggests this could start with the six core values of financial management. They are ideals, hard working, responsibility, self-equipped, self-control and generous respectively. He said: "Parents can instill financial integrity to their children from the details of their daily lives, such as by sharing stories of successful people, financial management, and analysis of the consequences of poor financial management, so that they can learn to take precautions."
Guan Xian-bin, said: "Be sure let the children pay their debts. They would understand the consequences of advance spending of tomorrow's money, and the responsibility for their decisions."
Source: appledaily extracts translated
