Of the many skills and life lessons we teach our children, one that seems to slip through the cracks or take a back seat until their later-teen years is financial literacy, yet its importance can’t be overstated. Admittedly, however, even many adults aren’t as financially fluent as they should be, making it all the more difficult to adequately prepare their progeny for an economically stable future.
To use a particularly apt metaphor, investing now will pay huge dividends in the long run, and it’s incumbent upon us to make sure that our kids not only know how to spend and save, but also how to maximize the potential of their income, whether it be from a high school job or grandma and grandpa’s birthday cards stuffed with cash.
To help us better understand how we could teach our kids about money management, and turning their piggy bank into a swine-ancial success, we spoke with Simon Watkin, a Beijing-based Senior Financial Advisor at Bluestar AMG with eleven years experience helping expats in China make the most of their money.
What do you think is an appropriate age for kids to start learning about the ins and outs of money?
I believe it’s never too early to start learning the basics of where money comes from and how a person or family can use it. Teaching your child from as soon as they start learning numbers and math in school would be a good starting point.
Investment and money management are important aspects of adulthood, but why should kids learn about these things as well? How do you think it will benefit them later in life?
All parents want their children to grow and prosper. Teaching them early about investment and money management is a precious gift that is free to do, but can radically improve the chances of a child making the correct decisions when it comes to college loans, saving rates, mortgages, and investments that can safeguard their financial futures and ensure a prosperous retirement.
Aside from stocks or real estate, what other kinds of investment opportunities are out there?
Parents can start saving and investing for their children’s future by looking at a regular bank account to begin with, which will teach children about discipline and regular contributions. Another option that will increase the chances of higher returns is Junior Individual Savings Accounts (JISAs). They give access to the stock market and have tax free benefits. Other options include cash savings notice accounts and fixed-rate bonds for children. These accounts often offer better rates of interest than regular accounts.
If a kid were to come into a little extra money, say RMB 700, how would you advise they use that money to generate more in the long-term? Would it be advisable to start a small portfolio at a young age to see how it develops over time, and get a sense of how the market operates?
I think making saving and investing fun from an early age will keep their interest and attention in investing. Having a small selection of stocks and allowing a child to pick and choose as they get older is a great idea.
With more and more finance going digital, i.e. WeChat Pay and Alipay in China specifically, do you think it’s more important than ever to teach kids about Financial Literacy, and the value of money?
I couldn’t agree more. The earlier we teach children about the power and value of money the likelier they will make sensible and correct decisions as adults.
If you could sum up the main tenants of investment and money management in a few short phrases, what would they be?
Safety: Know your risk tolerance and boundaries
Stick to the plan: Understand your motives for investing, create a plan and stick to it
Realistic returns: Don’t expect double-digit returns from cautious asset classes like fixed interest funds.
Diversify your investments: Having too many eggs in one basket is still as relevant today as it was when the phrase was invented.
KEEP READING: Does a College Education Really Make Cents?
Photos: Unsplash
This article appeared in the beijingkids 2020 March – April issue
