Should I write about money lessons for children? Two years ago, I wrote the blog post “Teaching children about money”. However, unlike the very popular post “Another PSLE result release day”, not many read it. Apparently, blogging about PSLE has nine times more views.
Obviously, Singapore parents think helping their children to score well in public exams is far more important than teaching them how to manage money. Many parents believe doing well in studies promises a good job in the future. And money will come and grow naturally.
Typical bankrupts are middle-income earners in their 40s and 50s
According to a Singapore debt counselling organization, among people who seek help for serious debt problems, 85 percent are middle-income earners. Only 10 percent are from the low-income groups. As for high-income earners, they usually have much larger debts.
Contrary to what everyone thought, a typical bankrupt in Singapore is not a young person who overspends. Government data show that almost half of bankrupts are between the ages of 40 and 54. It is because this group of people have higher income, more financial commitment, and better access to bigger loans. Unfortunately, they are also highly susceptible to retrenchment, investment loss and business failure.
One day when our children reach their 40s and 50s, if they don’t have financial literacy or the right concepts of money, are we still around and able to help when they run into financial troubles?
“In a lifetime, you must make a wrong financial decision, lose your hard-earned money and have your heart broken at least once. Then you can learn to be smarter. The earlier you fail, the better. Making elementary mistakes is best reserved for the young. It is too late and too painful to fail when you are no longer young.”
– Vina Ip, Behind The Scenes of The Property Market
How the 20-somethings invest
My elder daughter just turned 21. She began internship after her university year two exams. Likewise, I graduated early and also started my first full-time job at 21.
On a weekend, we mixed and matched ten sets of office clothes that looked appropriate for her CBD workplace. Suddenly, my old work shirts and accessories untouched for over seven years became useful again. It was amazing how they still looked fitted and stylish on her.
One of the best money lessons: Never waste when you can recycle.
One month later, she accepted the offer to continue working part-time at the company the next two years and after her graduation. We had more office worker topics like lunch places, OT and work-life-balance.
Last week she shared how her school friends invest. Like the adult world, there are far more guys investing compared with ladies. Most major in finance, economics, accountancy or subjects involving mathematics and numbers.
Some guys are into cryptocurrency like Bitcoin. But most put their money in Singapore or US stocks. As expected, young people prefer exciting growth stocks. One guy boasted about doubling his four-digit sum in stocks in two years.
My daughter is no longer interested in the bank stock I helped her buy when she was 17. She bought a few growth stocks in the US market. One of them dived by 80 percent overnight and she was “heartbroken”. Fortunately, it bounced back the next day.
I found my girl’s telling of investments no different from her sharing about going out with boys. So I just listened and acknowledged.
“Sounds fun. Tell me more.”
“That I don’t know. We only had … last time.”
“Wow really?”
“Oh is it hihihi …”
When both of us started giggling, I immediately turned into the young girl I once was.
Children learn money lessons through hands-on experience
Young people in their twenties are free to try any investment. With savings from pocket money, part-time work and national service, their capital is not much anyway. So long as they don’t borrow to invest, they can afford to lose it all.
Too bad that when I was her age, I was occupied with part-time jobs to support my university fees and living expenses. I wish I could start investing earlier like her. We should start small, stay consistent, and learn along the way.
On a separate note, whenever children are talking enthusiastically, even if it is our familiar or favorite subject, don’t interrupt them. Refrain from giving any comment or advice unless we are asked to. Be all eyes and hear them out.
In this case, I wouldn’t brag about any success in my investment journey. Unless being asked, giving unsolicited advice irrelevant to the child’s age and generation is no different from nagging.
For instance, it is meaningless for me to say “I made a tidy six-figure sum in this investment. You must try” or “This was how I pocketed a million and you should do the same too”.
Who cares? No one is asking for your opinion.
Instead, I told my daughter my early investment flop. I could have been more cautious investing in my own industry. With daily brainwash from the management, we were definitely biased. That is why many in the real estate industry end up buying the wrong properties.
“That’s how I lost money investing in IT and Telco ETFs in my 20s. I was so silly.”
“Never mind. You made it all back later, right?”
While I gained her sympathy, hopefully she could learn from my mistake.
Money lessons from an overseas learning trip
We often have money lessons from finance or investment experts. Some people share what their parents taught them. Conversely, sometimes I learn money lessons from my kids. They also teach me life lessons. Just hear what they say, reflect on myself, then comes the epiphany moment.
Last month, my younger daughter joined a school learning trip to Japan. There was some shopping in the 6-day itinerary. I decided to give her a card loaded with Japanese yen for her free spending.
“Are you sure you can trust a 14-year-old with so much money?” She was puzzled.
Her elder sister was upset. “Why you treat us so differently? Last time the budget of my Thailand school trip was $100. Now you don’t even give her a budget.”
“You are Gen Z and your sister is Gen Alpha. Not to mention every child is different. If a parent teaches every kid and nurtures children from different generations with the same approach, the parent is either ignorant or lazy.” I explained.
As a result, the lucky girl got to buy everything she likes in Japan. She even lent money to a friend who ran out of Japanese currency.
After she returned home, she told me this the following day:
“All these cute things are sitting in my room now. The thrill of having them has gone. But the people I met, the visits and the experiences are still fresh in my mind. Those fond memories are going to stay for very long.”
Good for her! She only spent $150 to learn one of life’s most important money lessons: Compared with money spent on things, money spent on experiences always offers better return on happiness.
Sadly, many people go through their whole life splashing out without realizing this.
3 reasons why we can’t stop buying
Incidentally, a 75-year-old Harvard study that lasts up to three generations told us the same findings.
“Money can’t buy us happiness, but it’s a tool that can give us security and safety and a sense of control over lives. At the end of the day, life is really about our connections with others. It’s our relationships that keep us happy.”
“Rather than buying a bigger house or a nicer car, if you use your money to share experiences with others, that money will get you a better return on happiness.”
Like it or not, human beings can’t stop buying mainly for three reasons:
1) Scarcity mindset
Marketers know best how to manipulate our FOMO or scarcity mindset (think limited editions and limited-time special offers). We end up buying on impulse for things we don’t need.
2) Identity and image
We want to own luxury items, expensive cars and nice houses to show others that we have money, social status and success in life. “Stuff” are used to convince others and reaffirm ourselves that we are doing very well.
3) Dopamine rush
Dopamine in our brain’s reward center craves pleasures and feel-good emotions from rewarding behaviors. We think we deserve to be rewarded. But in reality, we just need to fill that emotional void. That is why we need retail therapy to help us cope with stress and burnout.
As a reward for her hard work, my friend used her company bonus to buy a designer bag at an airport’s duty free shop. She said the happiness and thrill only lasted from buying at the shop to reaching the boarding gate. I am sure the happiness from a loved one’s touching words or sweet gestures lasts much longer.
When you feel you don’t need more
In my mid-thirties, I used to splurge on branded items and beauty packages. A director and department head should wear a branded watch and carry a designer bag. In actual fact, they were compensation for being stuck with long-hour work, office politics and no me-time.
Fast forward to March this year, I went with a girlfriend to Tokyo where we stayed one night at the Gotemba Premium Outlets. With 290 stores, my friend shopped till she dropped. In contrast, I only bought a wallet for my daughter’s birthday, a set of pajamas for the younger one, and a figurine cup for a friend.
Frankly, I could afford every luxury brand and designer bag in the mall. But I feel I don’t need anything.
These days I often carry a tote bag I sewed with a “handmade” logo. It has the exact design, color and material I want. Besides, I hope others can notice my body figure, without any distraction from an irrelevant designer logo. People my age who still stay in shape can’t do so with good genes, money, intelligence or luck. It is only through discipline.
At this stage, I am happy with what I have. With my family and a few good friends, I have never been so contented with life. I don’t need any of that “stuff” anymore. Material goods have no place in me because there is no void to fill.
Above all, at my age I know who I am and what I want. Finally, I can be myself without the need to please, impress or blend in. There may be people who can guess my net worth. If no one knows, it is even better.
Want the right thing and how to get it
Naval Ravikant is a successful entrepreneur and angel investor. There is a very good quote in the book The Almanack of Naval Ravikant:
“The only true test of intelligence is if you get what you want out of life. And there are two parts to that. One is getting what you want. You know how to get it. And the second is wanting the right things. Knowing what to want in the first place.”
1) Wanting the right things
What we want is often what we pick up from other people. They can be our parents’ expectations or our peers’ aspirations. We seldom spend time thinking what we really want. But we spend lots of time getting what we think we should have. Then we end up regretting what we should or shouldn’t have wanted.
2) How to get what we want in life
Many Singaporeans often talk about money or getting rich. But somehow, they are always staying in the same spot. It reminds me the time in my 20s when I worked very hard to support myself and my family.
As times goes by, I learned one lesson vital to success in life: If you want to be rich, don’t think about how to get rich. Instead, concentrate on the tasks you do that will make you rich. Similarly, if you want to be happy, don’t think about how to be happy. Simply focus on the people or things that will make you happy.
Food for thought
We are paid humbly when we are young. It can be torturous saving every penny with a rigid budget. However, we can still set up recurring transfers with a percentage of monthly income automatically put aside for savings or investment. I used to save 60 to 70 percent of my salary. The percentage increased as my income grew.
When pay rises, beware not to fall into the trap of “lifestyle creep” with spending increases with income. It is unnecessary to raise living standard every time there is a raise or promotion. Forget the “I deserve it” mentality. Rather, find out what challenges we are facing and find ways to fill the void.
The above money lessons are what I have shared or will be sharing with my children. If your kid is also starting to work or you are building your career, hope you will find these money lessons useful to you too.
My book Behind The Scenes of The Property Market is available for preview and order online.
If you need advice on property matters or residential properties in Singapore, you can check out my one-to-one consultation service.
Check out my new online courses How To Buy Good Quality Properties and Buy The Right Condos.
If you miss “The Future of Singapore Homes” education seminar, you can watch the recording here.
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