Financial literacy has recently been in the limelight given the backdrop of geopolitical uncertainty, rising interest rates and day-to-day living costs. In fact, financial literacy was one of the top concerns highlighted by Singaporean youth in the Post-Budget 2023 Youth Dialogue. According to a recent study, most Singaporean youth said they were only “somewhat confident” or “not really confident” that they are doing what is needed to meet their long-term goals.

How did we get here and how do we prevent this from happening?

The key is to nurture kids with financial literacy at a very early age, setting the stage for healthy financial habits and lifelong prosperity in their youth and adulthood. Despite being a core life skill, financial literacy is not formally taught in schools. This is where parents need to step in to give their kids the gift that will keep giving – knowledge about how to handle their money.

Many parents make the mistake of not thinking about financial literacy till their kids are well into their teenage years. Financial literacy can begin as early as three years of age. In fact, from the ages of three to eight years old, kids absorb the most information.

Now that we have established the importance of financial literacy at a young age, let’s look at how to tangibly impart these skills in our children.

1. Talk to them about money

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As a kid, I remember accompanying my parents to the ATM machines every Saturday morning, to withdraw cash. For the longest time, I believed that you can spend as much as you like and when it’s finished, all you need to do is get more from the ATM machine which will always dispense more money. If only!

A child’s upbringing plays a big part in shaping their understanding and relationship with money. Kids very closely observe parents’ behaviours and habits, which is why it is crucial to involve them in conversations and concepts relating to money. It can be as simple as explaining to them that money is earned from the hard work they do all day, and they then keep the limited money in the bank for safekeeping and withdraw it to use for their daily needs and wants. Important takeaway for them here would be that it is limited and needs to be divided among needs and wants.

2. Teach them about needs vs wants

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The next important concept that would follow is teaching them how to use this limited money and what are needs vs wants.

A fun way to do this, for example, could be by letting them pick items with you in the grocery store where you can explain that vegetables for dinner are a need as we need to have a meal for dinner, but a packet of chips, or chocolate are wants we could do without. Similarly, a backpack for school is a need but a new toy to add to their many existing toys, is probably a want.

Here, it would also be useful to also bring in concepts like budgeting and saving. Give your kids a fixed allowance and let them make the decision of how much they want to save for a future goal like a new video game and how much they want to spend in school during recess. This will also instil in them the concept of delayed gratification and a future return.

As they grow older and become teenagers, parents can also start them off with investment concepts and fractional trading, where they could play around with investing from as little as US$1, just to get an understanding of how the stock market works, what is a profit and what is a loss.

3. Build safe financial habits

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In this environment of fraudulent transactions and increasing scams, parents should also build safe financial habits in their kids from a young age.

This can be as simple as telling them that their wallet needs to be kept safely in their zipped backpack, or explaining to them that they should never share passwords, ATM pins with anyone. Once they grow older, it can be in the form of teaching them about different types of scams, how to identify them and what to do if they encounter them.

Financial literacy: start young, start right

There is never a one-size-fits-all approach to instilling financial literacy but the important thing is to have open conversations with your kids and not shy away from explaining money concepts to them, thinking they won’t understand. That being said, it is also important to keep things age-appropriate, which is why things like investments and asset classes should only be introduced to them when they become teenagers.

It is also important to ensure that while you are teaching your kids about money and budgeting, you are not becoming too strict or overly calculative. The essential thing for kids to understand is that there is always a choice they can make with money and how much they choose to budget for spending, saving and investing depending on their needs and wants.

By doing these simple things from a young age, you will be part of creating a generation of money-smart individuals, empowered with the tools to navigate complex financial waters.


Contributor: Raymond Ng, CEO, Revolut Singapore

Photo: Raymond Ng, CEO, Revolut Singapore

Revolut, a global financial superapp with over 35 million customers worldwide offers a product called Revolut <18, for kids and teenagers aged 6-17 years old. It is connected to their parent/guardian’s Revolut account. The aim is to help young people feel positive and empowered about money and give them a financial head-start in life.

Once your kids are above 18, parents can also teach them stock trading through the Revolut app which allows fractional trading for as little as US$1.

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