The 5 Most Important Money Lessons To Teach Your Kids

What our kids think about money:

When I said we didn’t have enough money to buy a toy that he wanted, my 3-year-old suggested I go to the bank and withdraw more money.

When my 5-year-old took loose change from the table-top to buy a can of soft drink, he said the money was his because he “found it”.

My 7-year-old asked why the government won’t simply print more money. Well, isn’t it a bit early for a lesson in Economics, son?

Why Kids Need To Know Real Lessons About Money:

  • Set expectations. When they know where money comes from, they stop expecting you to buy everything at their request.
  • Clear understanding leads to better cooperation. At least the kids will be on the same page as you when it comes to money, how it’s earned and how it should be managed.
  • The earlier they start, the earlier their finances are safe. When they know how to earn, manage and multiply their money, it gets easier with time.
  • Habit starts now. We instil the habit of brushing teeth in our kids because we know dental health is important for them. The same goes for money. How they view and spend money now will most likely influence how they view and spend money when they’re grown ups.

What Kids Need to Know About Money

1. Goods and Services Cost Money

When my eldest son was 6 years old, he asked me why we needed money to “buy” things. It was questionable to him that we can’t just take whatever we want without having to pay for it. So that’s when our lessons about money started. Below is how I answered my son’s question:

Why we pay using money

At the very beginning, people exchanged goods e.g. a farmer with an orange plantation can exchange 5 oranges for 5 apples with a farmer with an apple orchard. But what if the apple farmer doesn’t want oranges but bananas instead? It was going to be too cumbersome for the orange farmer to exchange his orange for bananas then exchange those bananas for the apples he want. That is why people came up with something they agreed could be used to exchange for any good they want. That’s how money was created.

Some things are affordable, while some are not.

In our house, our children learn, from a very young age of 3 years old, that we need to pay for the things that we want to own and activities that we want do. My current 3-year-old always ask “Mummy, what’s the price of this [item]?” and when I tell him the price, it will always be followed by this question “Is it expensive or cheap?”. Oh my dear Louis. You’ve learnt before turning 4 that we need to consider the cost of the things we want to buy. We’re so proud of you baby!

2. Money is Earned

The number one thing our kids thank their father for is “for going to work to earn money so we can buy food and the things we need”. It appears in their birthday cards for their daddy, father’s day cards and even a random thank you card. I suppose we have done a pretty good job in teaching them that money needs to be earned, in exchange for time and skill, that money does not simply come unlimited. This is so important because they need to know that they will have to earn their own money when they grow up, instead of expecting to have it handed to them.

3. They Need to Make Choices (Opportunity Costs)

My husband is good at this one. He often compares the price of a toy to that of one McDonald’s $1 ice-cream cone. When we bought a pair of shoes that cost $50 for one of the boys, my husband told them that the same amount of money could have been used to buy 50 ice-cream cones! This type of comparison comes up often in our day-to-day life so the kids understand that in every choice that we make, we forego something else that we could have otherwise gotten.

Other times we present a problem for them e.g. With $X they can either buy 1 of item A or 3 of item B, which one would they prefer? This is a good way for the kids to process in their thoughts what exactly they value more. Is it having one of item A or more of item B?

When they’re given the chance to actively make choices about their purchase, they become conscious about the concept of money.

4. Money Needs to be Managed

There are 3 things that we need to do with the money that we have: Spend, Save and Invest. The earlier we make this concept known to children, the better they get at managing their money as they grow up.

So our eldest has been wanting an Xbox for over a year. It’s only now that we told him he will have to save $1 each day from his pocket money and buy the Xbox at the end of the year. We also asked our 5-year-old (turning 6 soon) to save $1 a day to pay for his new bicycle. The point is to teach them how to save & wait. Because that’s what must be done when they turn into adults. Can’t run away from that fact, might as well get them used to the harsh reality early!

Investing is something you can introduce to children older than 10 years old. It involves research, comparison, decision-making and waiting. Skills that need long term commitment and practice.

5. Money Can Be Given Without Getting Anything in Return

Lastly, we can show our kids that money can be donated for a good cause. It is not necessary to keep all the money we have to ourselves. If we have extra, it’s oddly satisfying to give to charity or a cause we believe in.


What Can Money Buy For Your Family? Hint: It’s most probably Happiness

How often have you heard the ‘money cannot buy happiness’ debate? I’ve heard it often enough I almost believe it’s true. It’s fair to say we don’t need to travel in a private jet to be happy, or even business class. We don’t need to book a suite in a 6-star hotel when we’re on vacation to be happy. I get it. And I agree. That’s why most of us want to believe that money is not important, it can’t buy us happiness anyway, or so you think. Most of us see money as a vice. Some sneer at the rich. Some think the rich are greedy.

Let’s dig deeper, shall we?

Before we can answer whether money can buy happiness, we need to answer this question first: “What leads to happiness?”. Yes, happiness is in the heart, it’s an inside work and it shouldn’t depend on material things, yada yada…

But let’s be real here. For most of us, what determines our everyday happiness? I would like to say that there are a few things in life that undeniably determine everyone’s level of happiness. They are: passion, health, opportunities and time.

Money Can “Buy” Passion

Recently my boys have been interested in ice-skating. I’m not sure how it is in other countries, but here in Singapore, I would consider it a luxurious sport. The skates are over a hundred dollars per pair, each entry into the skating rink will cost our whole family of five around $100 per 2 hours. If we were to skate once a week, that would be $400 per month. That might not be a big sum to some, but it might be unthinkable to others.

My point is:

In some cases, money can allow you to pursue your passion, and that’s as good as buying you happiness.

Yes, some passion doesn’t require you to spend that much money. But what is passion? Passion is what the heart is deeply attracted to. There is a force tugging at your heart. But if at the end of that force is something expensive, we have to let the passion pass. And that will make anyone a little sadder. If we can afford to do what we want to do, it makes us happy and contented with life.

But since most of us don’t have a surplus of money in our bank accounts, we have been told that the key to being happy is to be happy with what you have, and not want more. It’s easier said than done. How can you control what you want? Sometimes you can, sometimes you can’t. But even then, money determines whether you get the chance. 

Have you heard of Joseph Schooling? The 21-year-old swimmer became Singapore’s first Olympic gold medallist in 2016 – and national hero – with his win in the 100m butterfly. He not only beat world-class American swimmer Michael Phelps, but also smashed the Olympic record with his time of 50.39 seconds. The important thing to note here is that his family supported him and paid for his training in the United States because his dream was to be an Olympic Gold Medallist. What would have become of him if he didn’t have the money and/or opportunities? He wouldn’t be where he wanted to be.

Money Can Buy Health

At the very basic level, having enough money to buy food from all nutrition groups can ensure you don’t have any nutrition deficiency and can lead a normal healthy life. At the other extreme, access to world class health care means nothing if you do not have the means to pay for the service. That’s the truth that our very lives depend on. A chemotherapy drug for lung cancer can cost $100 per capsule (no joke, personal experience in our family) and that adds up to $3,000 per month every month until you die, just for the medication. I mean, how many of us have that much money? Even your insurance plan might not cover 100%. So there goes your life.

Money can mean the difference between life and death, and yet people are still saying that money can’t buy happiness.

If being able to afford a longer lifespan (for you or your loved ones) does not bring you happiness, who are you kidding?

Money Can Open Doors to Opportunities 

I don’t even need to talk about third world countries. You know how money can change things. Let’s just talk about first world countries here. Many developed countries can provide basic education to their children at a very minimal cost or with heavy subsidy. However, who are the ones that are at an advantage? They are the ones that can afford enrichment classes and activities. Does it mean that enrichment classes determine your level of happiness? No. I’m not saying that. What I mean is with more money, comes more opportunities (enrichment classes), and with more opportunities come other opportunities (better grades lead to better entrance into better universities etc). And it goes on and on.

The more opportunities you have, the better chances of you having a better life.

Money Can “Buy” Time

Do you know how much an average security guard in Singapore earns per month? They earn an average salary of S$23,874 per year that comes down to $1,989 per month. But how many hours are they tied down to their work? 12 hours per day. On the other hand, families in Singapore spend an average of $550 on domestic help so that they can have free time to spend on their family, job and leisure. Having little money restricts the amount of free time you have. The more money you have, the more you can afford to pay for more free time. A new research suggests that using money to buy more free time – such as paying for a cleaner or cook to take the daily chores off your hands – does actually improve well-being.

So where am I going with this blog post? I’m just trying to make a point that money is important and that it can buy you happiness. This is so that you can teach your kids the right mindset. Get them set on the right path. Don’t let them look at money as an evil thing. Let them see how helpful money can be.

However, it is also our job as parents to not let money become the focal point of life. Research has shown that happiness level drops once you pass a certain level of income. What we can teach our children about money is that it is a necessity in life, one that can make the difference between a good life and a miserable life.

Money cannot buy happiness, but money can buy quality of life. And that’s almost the same thing.

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