Managing your finances takes effort and consistency, which pay off when you become financially stable during any situation. These days, it is more crucial than ever to be on top of your finances—to survive and even thrive financially during challenging times.
Financial literacy advocate and EastWest SVP and Head of Regional Branch Banking Ivy Uy stresses the importance of managing money efficiently starting at an early age. “We need to take what we know now and teach it to the next generation, and this includes how to be money smart,” she said. “We can start by teaching our kids how to save money—establish the mindset of saving for the future and develop the habit.”
Here are some ways to introduce the concept of saving to children.
Establish needs and wants
Explain the difference between needs and wants. Necessities include food, basic clothing, shelter, healthcare, and education, while wants are the extra things like a cool toy or a trendy gadget. “Advise your child that when it comes to spending, they should prioritize what they need over what they want and only consider buying what they want if they have the budget for it,” Uy said. “Teach them one of the golden rules when it comes to spending: if you see something you like, ask yourself first if you truly need it.”
Help them get started with an allowance
Allowances are usually given when the child enters his/her pre-teens but you can always start teaching them how to save at a younger age by giving them a small monthly allowance or pocket money. When they have their own money to take care of, they will have a better idea on how to save and spend wisely.
Set savings goals
Let them take on a goal that they want to have, like saving up for a new toy, and plan the steps to reach that goal, such as saving up a specific amount from their allowance for a set number of months. This will help motivate them to start saving money and set the foundation for bigger savings goals in the future.
Set budgets and track expenses
Teach them to set a spending budget per month and stick to it. It will help them to write down their daily expenses so that they can be more aware of where their money goes and be able to review their spending patterns at the end of each week. This will also help them reach their savings goals more effectively.
Teach them how to earn their own money
Aside from their monthly allowance, give them the opportunity to work for more money, such as doing extra house chores (on top of the standard ones). This will help them understand the value of hard work and hard-earned money.
Lead by example
“Kids are very keen observers, so they will notice whether or not you’re able to practice what you preach,” Uy said. “So it’s essential to also be on top of your own finances including income, expenses, budgets, savings, investments, and more. Your kid will eventually see that you are financially empowered and equipped to teach them everything they need to know.”
Open a bank account for your child
It’s never too early to set up a deposit account for your child, which can also give them an idea on how to save in a bank and earn interest, such as EastWest’s Kiddie Savings Account. It is an interest-earning Peso savings account for children 18 years old and below that comes with a passbook to easily keep track of their savings. All you need is at least Php 2,000 to open an account and earn interest at an annual rate of 0.125%. Interested applicants may visit www.eastwestbanker.com/deposits/pesosavings to learn more.
Introduce effective budgeting tools
As your child enters his/her teens, they will have more control over their money and their own expenses such as food, transportation and gas, books and school supplies, extracurricular activities, and entertainment. Now that our quarantine restrictions have eased, they are able to do things which they were unable to in the past two years.
To help them properly manage their expenses and promote responsible spending, you can introduce them to more EastWest products:
• Give them control over their budget by loading their allowance into an EastWest Visa prepaid card. This will allow them to only spend within their budget. Plus, with this card, they can experience cashless purchases online and at Visa-affiliated stores, enjoy exclusive privileges with partner merchants, and conveniently access funds from ATMs worldwide, while being protected with best-in-class security through the card control facility. The card’s balance can be reloaded easily via EastWest online or mobile. Interested applicants may visit www.eastwestbanker.com/prepaidcards to learn more.
• Get them acquainted with the concept of credit by applying for an EastWest credit card and sharing your spending privileges with your child through a supplementary card. You may assign a monthly sub-limit that they can use to pay for purchases when they are shopping on their own, or for possible emergencies, without having to worry about overspending. To learn more about the different EastWest credit card variants, visit www.eastwestbanker.com/creditcards.
“There are so many benefits to teaching your child how to save and spend responsibly. They learn to be disciplined, goal-oriented, organized, hardworking, and independent. With these strong values in place, they will become ready to conquer the real world with financial security in their future,” Uy concluded.