Are you worried about your teenage children’s safety, health, social life, future, and education? In addition, they are constantly bombarded by advertisements, online shopping, peer pressure and “Instagram culture”.
Various surveys have shown that Malaysian millennials (aged from mid-20s to 40) have a tough time when it comes to money management:
- 70% of Malaysian millennials do not live within their means – Asian Institute of Finance, 2015
- 74% of millennials in Malaysia are struggling to meet day-to-day expenses during the Covid-19 pandemic
- 53% of Malaysian millennials cannot survive with their savings beyond three months
- Lower income millennials spend 48% on food, 27% on entertainment
Looking at the situation above, we should plan forward and ensure that the next generation – our teenagers – will have a better start in money management. Here are three alternative ways parents can teach their teenagers about money management.
1. Joining Them Instead Of Stopping Them
Online shopping has enabled spending like never before, especially during the pandemic. Most teenagers will want to buy and own things if they have the means, although more often than not, such purchases are due to peer influences.
Being the financial provider for teenage children, it is important that as parents, we instill the importance of self-control and wisdom about leisure shopping. Yet, this is the phase where teenagers become more rebellious, it is simply not enough to just tell or nag them. The old saying has never been truer – “If you cannot beat them, join them”.
Go on Shopee or Lazada with them. Teach them about vouchers, free shipping and sales. Or maybe it will be them teaching you instead! Shopping online with them has its benefits, such as:
- Bonding time and relationship building with your child
- Slotting in some advice about quality vs quantity, self-control and impulsive buying behaviour
- Monitor your teenagers’ shopping behaviour, what is in their shopping cart, wishlist and their shopping history
- Share your experience and mistakes about shopping and spending
2. Give Praise And Advice
It is so true, that it must be repeated again. Teenagers are rebellious creatures!
Nagging and telling them what to do just will not cut it. It did not work for teenagers during the 80s, 90s, and 2,000s and it certainly will not work today. However, they do seek your approval and appreciation, especially on things of importance to them. We often hear “my parents do not understand me” or “my parents are just not cool”. One way to avoid such comments are to acknowledge and sometimes praise what they are doing right (or vaguely right) financially.
“Boy, it looks like you did not spend too much money at the mall today. Good job!”
“Girl, you really found a real bargain with the dress you bought online. You certainly know how to shop.”
After praise is given, teenagers will be more receptive towards advice. The acknowledgement that they did something right, gives them a sense of pride, and the urge to do it better.
3. Let Them Make Mistakes
If you recall how you sharpened your money management skills, more often than not, it was not taught or told by your own parents. You learnt them either by experience, hardships, or through mistakes that you have made. Depending on your generation, we grew up in a different time and culture than the teenagers of today.
One way that we can teach our teenage children about money management is not by teaching or telling, but by letting them experience mistakes of their own. Here are ways you can set the stage for your teenagers to learn some money management:
The salary and lending method
The delayed gratification lesson
We are spoilt with instant gratification. What we want, we can get it very fast, if not, almost instantly. Think Netflix (movies), Grab (food/transport), Shopee/Lazada (shopping) and WhatsApp (communication). The Generation-Z of today are born into a life of instant gratification. However, the culture of savings and investments are more often than not, a slow and disciplined process.
Thus, it is even more crucial that parents practice delayed gratification with teenagers and resist buying things they want versus what they really need. For example, if they ask you to buy something they want (big or small), try and ask them to wait for a few weeks or months. Suggest that if they want it sooner, they have to contribute part of the cost too. You may even notice a change that as time passes, they will realise that the purchase is not worth their allowance, and their desire may even fade.
The compounding interest lesson
Open a bank account for your teenager with some sort of interest element and allocate your teenager’s allowance in it. Alternatively, some e-wallets currently have an interest element as well. This allows them to learn about the compounding effect of interest on interest.
With this method, you can teach them about saving their allowances, and watch their savings grow every month. Take this opportunity to teach them about inflation and other forms of investments that can make their savings grow even faster, such as fixed deposit or a bond fund. Although they are too young to invest into unit trusts themselves as a primary applicant, you can create a joint unit trust account with your teenager being the secondary account holder.
As parents, we do our best to teach our child the important elements in life. Early money management is something that is important and should be deeply rooted into their young minds. However, this is easier said than done as there is only so much we can do as parents.
Their personalities and spending patterns are an amalgamation of a variety of influences, from friends, to TV, to the internet and also by observing their parents’ money behaviour. That said, as parents, we should learn and practice what we preach about healthy money management.
About the Author
Alvin Kwan, CFP CERT TM is the executive director and head of financial planning at Redvest Wealth & Asset Management. He has over 12 years industrial experience in the financial industry, specifically in wealth advisory, private banking and stock broking. He was also a lecturer in areas of investment management, derivatives, and financial markets.
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