12 December 2018
Experts say children should be taught early in life how to handle finances. Photo: ExpertBeacon
Experts say children should be taught early in life how to handle finances. Photo: ExpertBeacon

How to help your kids boost their financial quotient

I read a report about a second-generation scion of a wealthy clan who lost the entire family fortune due to poor financial management and obsession with gambling.

The young man refused to find a job and became homeless, carrying all his possessions in an expensive Hermes bag. He was later arrested for robbery; he was so hungry he was forced to steal food in a supermarket.

The story is not unusual. The low birth rate resulting from China’s one-child policy has generated a generation of “princelings”.

Many parents are willing to cut back on their own expenditures to be able to offer the best education for their kids. More affluent families send their children to study overseas.

Traditional parents still believe if their kids could get good grades at school, that would lead to a good job and a decent life in the future. All they care about is the intelligence quotient (IQ) of their kids, and sometimes also their emotional quotient (EQ), but most of them ignore financial quotient (FQ).

One of my clients saved each penny to be able to send her son to the United States to get a college degree, and after he graduated and returned to Hong Kong, he was able to land a well-paying accounting job. 

However, the son has no savings even after working for three years. He also continued to live with his parents and did not contribute financially to the family. In fact, the mother hopes to save some more money to help her son buy an apartment and get married.

The parents have cuddled the son too much as he is the only child. The son lived a comfortable life in the US; he never tried any part-time job to help himself. And even after becoming a professional, he still depends on his parents.

This shows the need for parents to nurture the financial intelligence of their children from an early age. Otherwise, their kids may lose everything even if they have a good education and earn a good living.

Market studies show that children aged 5 to 14 are at a critical stage of developing their financial intelligence. As Xia Yunfang said in her book, “wealth can be taught” and parents should help their kids to hold the right views about money and wealth at different stages of their life.

For example, kids should be taught how to recognize coins and bills at three, learn how to buy simple goods on their own at four, understand that money can be made from work and learn how to count coins and notes at five.

Parents should teach their children to read price tags and learn how to make purchase decisions at the age of seven. And an eight-year-old should start to save money and be encouraged to make extra money from running errands.

At nine, kids should be able to plan their expenses. And 10-year-olds should learn to forgo consumption of less important items to be able to save money for more valuable goods.

Parents should also train their children to compare prices, use coupons and take advantage of discounts at 11. At age 12, kids should be able to make bi-weekly expense plans and learn to use banks.

This article appeared in the Hong Kong Economic Journal on June 8.

Translation by Julie Zhu

[Chinese version中文版]

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Associate director of Convoy Financial Services Ltd.

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