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“Why can’t I spend all of my pocket money, Mummy?”
At a Glance
One of the most important things you can teach your child is financial wisdom and discipline in managing money and spending within his/her means. This can build a strong foundation in financial management and be a lifelong lesson for your child.
Observe how your child manages money matters. Take this opportunity to help teach him/her financial discipline and inculcate healthy spending habits.
A good way to start is by working with your child to start a personal budget with this simple activity. We also have some tips you can practise in your daily life to help turn this lesson into a habit for your little one.
Your 7 – 12-year old
It will take:
about 60 minutes over the course of 1 week
Printed “My personal budget” activity sheet, pencil & eraser
Self-discipline in spending
The basics of setting up a budget
The differences between needs and wants
To help your child develop better discipline and spend within his/her means, it’s a good idea to get him/her to start maintaining a weekly personal budget.
To make things easier, we’ve prepared this “My personal budget” activity sheet for you.
Step 1: Determine allowance
On the sheet, write down the total amount of money your child will have for the week.
How much is your child’s allowance? Will he/she get additional allowance for doing extra chores at home?
Step 2: Track spending
Over the course of the week, get your child to update the sheet with everything he/she spends on. Make sure your child separates these items into two groups: NEEDS and WANTS.
Check that your child is categorising needs and wants correctly. Discuss with him/her if you disagree with any of his/her choices and mutually agree on any changes you make.
Step 3: Review and adjust
Based on 1 week’s worth of spending, review your child’s spending habits together.
- How much was spent on NEEDS versus WANTS?
- If your child has money left over as savings, you may want to suggest that he/she deposit it in a bank account, and perhaps aim to save a larger amount the next week.
- If your child has spent everything, or spent more than his/her weekly budget discuss what he/she could have cut from the WANTS category.
Review the budget weekly and suggest necessary adjustments until you see that your child has developed the financial discipline to spend wisely, within his/her means.
1. Keep to the budget/allowance allocated
Explain to your child that his/her allowance is all he/she will have to spend for the week. Remind him/her to keep his/her spending strictly within that amount. This will help him/her understand why it’s important to spend within his/her means.
2. Set a good example
Parents are their children’s role model. Your child will take cues on how to spend based on how you do. Therefore, we hope you will diligently practice good financial wisdom and discipline daily.
When you make a decision to save (such as by taking the train instead of a cab; or buying a reliable home appliance instead of a popular branded one), explain your choice to your child.
By discussing your financial choices, you will help your child better understand the reasons behind them; and he/she will be more likely to make right spending decisions in turn.
A Smart Buddy for smarter budgeting
|A POSB Smart Buddy Watch will help your child learn about budgeting, set savings goals and develop healthy financial habits. |
NOTE: Cashless payments are convenient, especially during the current Covid-19 situation when it can help minimise contact and handling of physical cash. However, we do recommend that you carefully assess your child’s ability to handle cashless payments before getting him/her a Smart Buddy Watch.