When it comes to money, we learn a lot from our experiences growing up. However, most of us grew up either without learning about personal finance or we unknowingly picked up bad habits from our parents that followed us into adulthood.

Good financial management is undeniably one of the key skills that each adult should have and you can help your children get a headstart on life by nurturing their financial literacy.

Teaching them good money habits and simple financial concepts while they’re young can help put them on the path to financial success in the future.

Here are six ways you can teach your kids about personal finance.

1. Talk to your kids about money

In Singapore, money matters are often not openly discussed within families and this can curb the growth of personal financial literacy. If we don’t talk about money at home, and we don’t learn about personal finance while in school, then we’re left to bumble around and try to figure things out when we’re adults.

Actually talking to your kids about money is a great first step to teaching them about personal finance.

If you think that sounds intimidating, it shouldn’t be. You don’t have a financial genius to teach your kids to be financially responsible.

Talking to your children about finances is more about imparting basic knowledge such as how money works, how money is earned, and the concepts of income and savings. It’s about teaching them the difference between wants and needs.

It also doesn’t have to be a big production such as sitting them down for a serious lecture-style session. You can have small teaching moments, whenever the situation allows for it.

For example, when you’re queuing to use the ATM, you use that time to explain to your child how an ATM works and that the money you’re taking comes from your own savings account. Or if you’re at the supermarket and you’re paying by credit card, you can share with them how a credit card works and why it’s important to pay your credit card bills in full every month.

Little moments of teaching can grow into an arsenal of knowledge over time. Having an open and safe environment to talk about money could also give your kids the comfort and confidence to approach you with questions when they’re unsure about money matters.

2. Set a simple budget for them and teach them how it works

Budgeting is a crucial personal finance skill, and you can teach this to your kids when they’re young.

This lesson is well-suited for when your kids start going to primary school and have to manage some of their own daily expenses. You can have a talk about how much spending money they have every day and how they can allocate their expenses.

You can emphasize the value of having a budget by giving your child their spending money on a weekly basis. This gives them the opportunity to manage their spending and learn the consequences of going over budget and not having enough by the time Friday rolls around.

If your child is old enough to have their own phone, you could teach them to use a budgeting app. Challenge them to track their spending, their income (if they earn any extra cash from doing more chores or doing a part-time job), and their savings.

After a month of tracking, you could discuss with them on how they’re spending their money and if there are anything they could do better in terms of money management.

You could also share with them that you have your own budget for family expenses. This gives them an idea of how much it costs of support a family, and that the lifestyle and activities you enjoy together all come with a price tag.

3. Give them opportunities to earn their spending money

As parents, you want to provide your children with the best and, if you’re financially comfortable, you may not bat an eyelid at making expensive purchases for your kids.

A parent’s’ desire to give their kids the best often means that children have very little understanding of the value of money. Kids may not have a good understanding of what things cost, what’s considered cheap or expensive, or what is a need versus a want.

You can teach your kids these concepts by making them earn their own money through their own effort, sweat and hard work.

When your children are old enough, instead of just giving them allowances, consider reframing their “allowance” as “commissions”. You can do this by tying their “commissions” to the completion of simple chores or tasks.

In essence: have them earn their pocket money instead of just receiving it. And if they have their eye on a special purchase, encourage them to take on more chores to earn more money to save for that goal.

Work is a necessary life skill, and teaching your children the value of hard work and of earning their money can set them up for success when they’re older.

4. Show that every financial decision has a cost

To let your kids learn the value of money and managing it well, you have to allow them to make mistakes and experience the consequences of their actions.

If your child has spent all of their weekly budget by Wednesday, let that be an opportunity for them to experience what it means to not have enough money. That could mean them not being able buy canteen food and bringing a home-packed lunch for the rest of the week. Or perhaps they could do extra chores to earn more pocket money.

Teach them that a bad financial decision will lead to bad consequences, and they will learn from the experience.

You can also teach them about opportunity cost and that money is finite. For instance, buying a backpack means that they can’t also buy a new pair of shoes. If they want to buy those shoes, then they need to find a way to earn that extra money.

Allow your kids to understand decisions and outcomes, and have them weigh one decision over the other.

Nothing in life is free, and allowing your kids to learn about how to earn money, what it is worth, and how to spend it wisely can let them develop a healthy mindset towards personal finance.

5. Get them started on a savings habit

We all know that saving money is a good habit, but for some of us it can be a hard habit to cultivate. Teaching your kids the value of saving as well as how to save can shape their mindset about this important facet of personal finance.

So what are some practical ways to teach your kids about saving?

For young children, incorporating a visual element can help them better understand this concept. So instead of a piggy bank, you could try having them use a clear jar to put their savings in.

This allows them to literally watch their savings grow, which can have a powerful and motivating effect. Last week, they might have had only $2 but now they $10. Talk them through the growth and make a big deal out of it so that they feel good about saving.

With older kids, you can take it one step further and allow them to open their first savings account. This gives them the responsibility of managing a bank account and also offers you a chance to impart knowledge about interest rates, different types of bank accounts and how to manage a savings account.

You can also share with your children the ways that you are saving money. Speak to them about why you’re saving and encourage them to set their own savings goals as well.

6. Set an example for your kids to learn from

The last tip we have is to teach by example. While actively making the effort to teach your children money management is great, it’s even better when your kids see you practising what you preach.

Do you want your children to understand the value of delayed gratification? Then don’t undermine the lesson by making your own impulse buys. If you’d like your kids to learn how to save money, let them see you putting aside your own money. Take them to the bank with you when you make a deposit into your savings account and tell them why you’re doing it.

Setting a good financial example for your kids shows them what good money management looks like and that it’s possible to have those habits in real life.

You may not think you’re actively teaching your kids, but remember that they’re always watching and learning from what you do.

The congruency between what the advice you give them and your actual financial actions is what will help your children internalize these lessons and develop good financial habits.