According to a survey conducted in 2019 by now-closed fintech company GoBear, Singaporeans were revealed to have the highest financial literacy rates in Southeast Asia.
The survey also showed that some 40% of Singaporeans are aware that they are not optimising their finances, with 25% not knowing when or how to begin planning for their retirement.
“In view of such numbers, it shows that financial literacy education should go beyond teaching youngsters how to balance their budgets. It should extend to areas such as investing, financial planning, and retirement planning,” says Pam Chuang, head of growth at Revolut Singapore.
Revolut, the UK-based fintech super-app, in February, launched Revolut Junior to its customers in Singapore, which allows parents to create a junior account where they can manage and control their children’s accounts through their own app.
Revolut Junior was launched in the US, UK, Australia and most of Europe in 2019.
Revolut Junior accounts, which are for children aged seven to 17 years, are designed to promote financial literacy and good money management habits among young people.
A Revolut Junior account can be used with a contactless debit card and a specially designed app. Parents can send money to their child’s Junior account and get real-time spending alerts for their child’s online and physical in-store payments.
The Revolut Junior app also comes with Revolut’s money tools, which have been adapted for children to make learning financial literacy fun.
When it comes to building financial literacy lessons for children, determining the right age to begin, as well as other tips, Revolut’s Chuang shares her insights with The Edge Singapore.
Why it is important to instil financial literacy in children
“It has been found that by the age of seven, most children will already have developed some basic concepts about money. It is important that parents instil in their kids a basic understanding of how it works and the role it plays in everyday life,” says Chuang.
“In Singapore, seven is the average age [when] a child starts to get pocket money. This is the perfect time for parents to start teaching them how to manage their money.”
Now that children have access to smartphones, they are now exposed to “financial transactions in seemingly innocent settings such as in-app purchases in the games they play”.
“There have been instances where children racked up thousands of dollars worth of in-app purchases because they were not aware of their actions,” she adds.
Financial literacy is a life skill
As adults, financial literacy is important to us as we navigate through bills, mortgages, and other responsibilities.
To Chuang, financial literacy is a life skill “because eventually our children will grow up and they’ll have to handle loans, mortgages, bills, and investments”.
“Learning to manage their personal finances early on in life will help them connect the dots later and steer them towards building a positive relationship with money,” she says.
In fact, Chuang believes that financial literacy education should go beyond teaching children the art of balancing their budgets. “It should extend to areas such as investing, financial planning, and retirement planning,” she adds.
“The earlier a person starts, the longer the runway they will have to build up their financial security, and thus freedom, for their future.”
When’s a good age to start discussing money matters with your child?
As soon as he or she starts asking for things.
“When we first begin, it might not even be about cash itself. It could be as simple as not saying ‘yes’ to their every request to help the child see that we can’t always get the things we desire,” says Chuang.
“We should also teach them the difference between a ‘need’ and a ‘want’,” she adds.
“For older children able to help out with simple chores around the house, parents can then introduce the concept of rewards, where children may have to work for the things they want. Values such as personal accountability and responsibility are some of the things children would pick up along the way.”
The key, says Chuang, is to introduce money management concepts in stages. “As mentioned earlier, financial literacy is a life-skill, it is something many of us are still learning to do well. It is, therefore, crucial for us, as adults, to help children get a good head start by building up their confidence around money.”
That said, you’ll also have to consider your child’s emotions. Instead of brushing them off when it comes to a ‘want’ you don’t believe they need, try talking to them and brainstorm some alternatives that may meet your budget, if at all.
“A child can also be empowered to make good decisions even if they don’t, at first, get their way,” she says.
How should parents teach financial literacy to children in a way that’s easy and relatable?
Through interactive lessons and with as many visual guides as possible, says Chuang.
“An important aspect of financial literacy education is the concept of delayed gratification. This is important because as adults, we don’t see immediate returns on our investments and savings. As parents, we need to nurture their ability to plan for the future."
“If your child wants to buy a PS5, set up a savings goal and have him keep a progress chart,” she adds.
Parents can also help their children see the relevance of money through their daily experiences and activities.
“If you’re going out to the movies, have your children plan out the day’s itinerary along with a list of expenses they think will be needed. Then use the chance to talk about the ‘unseen’ costs such as ERP charges, carpark fees, petrol costs, and so on.”
Or if you’re going grocery shopping, give your child a basic shopping list and a wallet with cash inside. Issue him or her a challenge, where he should hit a certain sum, or go under. If you have more than one child, the person who ends up with the most change after going through the list, wins.
Finally, get them an account where they can see their money grow, including notifications when money is being added to their account, or when they have reached a savings goal, like the one at Revolut Junior.
“This reinforces the habit-feedback loop and encourages them to work at growing their savings,” she adds.
Can these tips apply to adults as well?
Definitely, says Chuang, as it is important to understand the basics before venturing to more complex activities such as investing.
“Many of us tend to have the mentality that ‘this won’t happen to me’ so when we are hit by bad news such as retrenchment or cancer, we start worrying about our finances. We also tend to leave our retirement planning till later and before we know it, we realise we should have started way earlier,” she says.
“For children, financial literacy is mainly about learning and gaining confidence in money. For adults, it is more about growing your wealth and ensuring you have enough set aside for emergencies,” she adds.
