The COVID-19 pandemic has been a challenging period in our lives, especially to our family's finances: cash is tight nowadays, and we can no longer afford some activities that we used to take for granted.
For children however, this new situation can be difficult to understand. Now’s not the time to shelter them from the truth. Telling them that everything is okay does nobody any good.
Instead, break down the situation for them in a clear, concise manner: cash is going to be tight for a while, and the whole family has to do its part to help out in these trying times.
In fact, now is the best time to start drilling all the key financial lessons that some of us had to learn the hard way. Your kids will thank you in the future.
Lesson #1: Transparency is Key
While kids might not know what exactly is going on in the world, they do notice if something is wrong. Don’t try to hide the fact and be honest. Let them know that the family might not be able to eat out often or buy as many toys as before. This will help to reduce much of the frustrations and anxiety your kids might have with the sudden changes around them.
Lesson #2: Teach them the Value of Money
Kids need to learn how much things cost on a daily basis- groceries, bills, utilities. Give them the appropriate perspective to appreciate just how much work goes into paying for all these necessities in life. You can use the monthly bill as a tool to show how much you can save on by reducing electrical usage, or water wastage around the house. Let them know that they too, can play an important role in the family’s expenses and give them an early sense of responsibility. It will give them a sense of pride, and more importantly, helps with the utility bill.
Lesson #3: Allowances and Spending Wisely
Giving money to your child may seem counter-productive, but allowances are a good financial literacy tool. Give them a little spending money and show them how to save, and more importantly, how to spend their money. Teach them how to differentiate between Needs and Wants, and how to prioritize their expenditures. In the long run, you should start to see more thought behind every purchase they make- and more importantly, less requests for more money to spend on needless frivolities.
Lesson #4: Encourage the Older Kids to Get a Freelance Job
For those of you with preteens or teenagers, you can try to encourage a little bit of entrepreneurship. There’s a market for homemade arts and crafts out there that your younger kids can actively participate in. For your older children, there are always companies looking for people to help out in tasks such as data entry. All that’s required is a commitment to the necessary hours, and basic Microsoft Excel skills. It pays well for the work and helps them earn a little side income for themselves. Just be careful to monitor their online behaviour and the companies that they work for.
In Malaysia today, 80% of the population have less than 3 months savings and a staggering 40% have no savings at all. COVID-19 could be an opportunity and a catalyst to teach children how to manage money and ensure that they grow up financially literate.