CHILDREN ARE like sponges; they generally absorb knowledge fast. Parents can take advantage of this wonderful time by teaching them about money early on. In Rich Kid Smart Kid, author Robert T. Kiyosaki wrote: “I am often asked, 'At what age should I start teaching my child about money?' My answer is, 'When your child becomes interested in money.'” Lifestyle trainer Chinkee Tan, author of the book Till Debt Do Us Part, shares that kids can be taught about money as early as four years old. “Here are the ages at which a child can start learning about money,” says Chinkee, “and the kinds of things he or she is probably able to learn at that stage: Ages 4-5: What Money Does and Is Show the connection between what your child wants to buy and the money needed. Ages 5-6: Where Money Comes From Reward for good behavior or task completed should be EARNED. Ages 7-8: How To Save Set aside a portion of every peso your child receives from loved ones or relatives as savings. Teach your child the value of savings. Ages 8-11: How To Invest Your Money Wisely Save money through banks and other financial institutions. This allows the child to understand the effect that interest has on his or her money. Ages 11-14: How Money Works Money can be generated by getting into business. Money issues like borrowing, making loans and its effects should also be discussed. The goal is for the child to understand the pros and cons of borrowing. Ages 14-18: How to Make More Money At this age, a child also needs to understand how these things work: personal budgeting, overdrafts, credit cards, bank charges and so on. The goal is for the child to be independent in handling his or her personal finances.” Here in the Philippines, money is taught as early as preschool. It is part of the Math curriculum. But always supplement at home what is taught in school.
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IT'S Wednesday as I write this. These past two days, Monday and Tuesday, I saw my retainer fee for the month from a publishing company disappear--in just two days. First, my desktop computer refused to do anything at all, and so I brought it to the computer shop. It turned out that the power supply is broken and the video card sympathized with it and broke down as well. Since the computer guys were tinkering with the CPU, my son and I figured we might as well add 1 gigabyte of RAM. Then on Wednesday, it was time for the car to have its 40,000-kilometer check up. This does not come cheap, I realized, especially after I OK'd a rustproofing job, etc. So there, a whole month's work pay gone in two days. Why does money "evaporate" so fast? Parents with school age children may be thinking along the same line at about this time of the year. With tuition fees the way they are now, it's no joke to send one child to private school. And what now if there is more than one child? I learned from a financial management talk I attended years ago, that one must prepare for annual expenses by saving for it monthly. Take tuition fees, for instance. See how much the annual fee is for next school year, divide the amount by 12, and begin saving that amount monthly this June. This can be done as well for other annual expenses: car registration fees, annual income taxes (for the self-employed), and insurance premiums. As for repairs and maintenance expenses, saving a little more for this purpose every month will cushion you from the shock of getting your repair bill in the future. Preparing for big expenses this way will help you avoid panicking when it's time to pay up. Save, save, save.-Karen Galarpe
FOR THOSE of you who made it your New Year’s resolution to spend less and save more, how are you in the compliance department? I know it’s not easy to do so, but really, as simple as it sounds, that’s how you can have more money left at the end of the month or year. I’ve shared my own peso pinching tips to friends: 1. Look for a beauty salon that charges less. I’ve decided to give up some perks (free iced tea or coffee and a quiet ambiance) and go for a salon that gives the same service (without the perks) at half the cost. 2. Plan trips. Save gas, time, parking fees, transport fare, and energy by scheduling all your trips to one area at one time. 3. Eat more at home. Not only will you hone your cooking skills, you will be healthier physically and financially too. 4. Use up freebies. Those ketchup, sugar and cream sachets you get from fast-food outlets can be put to good use. 5. Try cheaper alternatives. Need your caffeine fix? Avoid the daily trip to the chic coffee shop and settle for the vending machine or bring your own coffee to work. 6. Pay attention to items on sale. Something you really need might just be on sale, so look at the sale items first. Also, check out secondhand bookstores for books that cost a fraction of the cost of new ones. 7. Go local. Help the economy and save your money as well; oftentimes, locally produced goods are cheaper than imported ones. My friend Migs Cruz, a doctor, shared that he has become more frugal now that he has two kids. Here are some specific steps he has taken to stretch that peso a bit more: 1. Use freebies as gifts. Med reps give tons of gifts to doctors, from pens and notepads to bags, clocks, and so much more. Migs gives these away to his staff and other personnel in his place of work and this saves him the cost of buying new gifts for Christmas. 2. Get a hand-me-down. Migs’ bike was stolen from his garage, so he asked around in the hospital if anyone had a spare mountain bike he could buy. One of the residents did, and sold it to Migs for P1,000 and a secondhand DVD player. He had it repaired for P500 and now it runs like new. A new bike would have cost him P4,000 to P5,000. 3. Recycle old clothes. Those old long pants are cut off just above the knee for P30 and still look great as pambahay. 4. Avoid the casa for car repairs and maintenance. Migs says, “My car aircon compressor got broken and the casa was charging me P40k for replacement to be done in 2-3 days. I went to Banaue Street in Quezon City and got the compressor replaced brand new at P17k. The service took only 6 hours.” Also, a 60-km checkup at the casa would have cost him about P10k, but he had it done at another auto shop at just P2,500 after the mechanic determined no additional repairs were needed. 5. Reuse stuff. Migs’ old Rayban sunglasses were already falling apart although the lenses were still OK. So he just bought a new pair of eyeglass frames and paid only P500 to transfer the old lenses to the new frame. A brand new pair of the same brand would have cost him P5K and up. Little steps like these count in stretching your pesos. :-) (Karen Galarpe)
This is a guest post from Rose Fausto, mother of Anton, the young boy I featured in my article 12-year-old investment whiz kid:
Thank you very much for that nice article you wrote in Money Smarts. We showed the article to Anton and he was thrilled but I guess the parents were more excited. I read all the comments and was happy to hear the nice ones, but of course, the mother hen in me was not so happy about a couple of comments calling our kids brats and my boy brash because he paraded his "total assets." Someone also said that these amounts might have just been given to the kids. Anton was more calm about the comments, saying, "That's ok lang Mommy." My initial reaction was to do an Excel file that shows the power of compounding, illustrating how modest cash gifts over the years and more importantly, the weekly savings from allowance, can give you a six-figure-saving at age 12 if you save religiously. Incidentally, the allowances of my sons are on the low end. I remember Pia saying to Anton during the interview, "Fifty pesos lang baon mo? (Your allowance is only P50? [Roughly $1])" Anton, in Grade 6, gets P250 per week; my second boy in second year high school gets P300 per week; my oldest in college gets P600 per week and all of them pay for their own cellphone load and some of their gimmick expenses. It's all a matter of attitude. Marvin, my husband, would joke that it pays to marry an Ilocana when he is asked about family expenses, savings and investments. Maybe it's true. I grew up hearing my Ilocana mom's mantra of "live within your means, and enjoy the fruits of your labor." I think the second part is just as important. I liken it to a diet. Depriving yourself too much will make it difficult to sustain. So, this is how we train our boys too. If I may, let me share with you the system that they follow: Step 1: Put their savings in their treasure chest/box with a tickler (small notebook) that records their savings. Step 2: If the amount in their boxes reaches around P1,000, they deposit it in their ATM accounts (which we call small account for easy understanding) Step 3: If the amount in their small account goes way beyond the minimum balance of P5,000, they transfer some to their big account. Big accounts, again for easy labeling, are the money market placements that give higher yields but cannot be easily withdrawn like their small accounts. Another option for their long-term investments are the stocks that they can understand. They also know that their money in stocks can sometimes lose some of its original value. (Rose is writing a book about raising her three sons and there is a part where she will discuss in full how she and Marvin train them to be financially literate.)
For many of us, financial lessons for our kids involve loosey-goosey lectures on wants and needs and “money doesn’t grow on trees” kind of things. Perhaps some parents go to the extent of opening up a savings account and explaining the magic of compound interest. Perhaps. From time to time, though, someone like 12-year-old Anton Fausto comes along, making you realize how easy it can be to underestimate what children can learn. We were at the set of Shoptalk at ABS-CBN News Channel (ANC) last Monday where host Pia Hontiveros interviewed four kids about saving money at a young age. Each one had an amazing perspective on money: Melvin Esteban’s eight-year-old niece Maxine, Randell Tiongson’s 17-year old daughter Ysabella, my 13-year-old Alix Danielle and Anton. “So Anton, how do you save money? Do you have a savings account? How much money do you have?” asked Pia. “My assets are in the six-digit figure,” he said matter-of-factly, almost surprised that we all looked so surprised. Truth is, my jaw dropped. It wasn't the amount, although that in itself is a huge figure. It was more of how he said it. Pia laughingly said after the show that she was floored, too. “I have never used that word before!” said a very amused Pia. My guess is he absorbs these things at home. His dad, BDO chief investment officer and senior vice-president Marvin Fausto, used to head the bank’s trust department. Now he’s in charge of investment planning for the bank. Anton explained that he has a “small account” and a “big account,” just two of the financial tools he uses. The big account of course grows his money faster with a higher interest. He also buys stocks, based on recommendations from Dad. He doesn’t make money all the time on these stock purchases, he said, but he shrugged off these losses. Wise. Mistakes from time to time are part of money lessons, too. These days, Anton is saving up for a laptop. He still has a long way to go: the laptop costs P50,000, I think, and he has P3,000 so far. But the process is a real-life lesson on goal setting, discipline, hard work, and frugality. I bet he will learn more from it than some of his subjects in school. All four kids save from their allowances, and distinguish from wants versus needs. They save for what they want instead of ask Mommy and Daddy to buy items for them. It was very interesting when Pia asked them about wanting what others in their peers have, like PSPs, Ipods, etc. They don't deny wanting those eye candies and having the desire to "keep up with the Joneses" just like many of us do. But they said they step down when Mommy and Daddy makes them see why these things are not wise purchases. Eight-year-old Maxine, niece of registered financial planner and resident Intsik-na-Ilocano-pa expert of Generali Pilipinas, has a great perspective on money. She wants to save P1 million for her yaya. It was obviously not a scripted goal; the kid showed maturity beyond her age. “Can you distinguish between a want and a need?” Pia asked her. “A want is something we can live without, while a need is something that we really should have like food, clothing, and other stuff like that,” Maxine replied. Sometimes, those who of us who are already adults still don't get that! Ysabella (also called Billie), is a 17-year-old college student. She’s the daughter of Randell Tiongson, president of Personal Finance Advisers Ltd., and moderator of successful forum Income-Tacts.com. When she last bought a mobile phone, she paid for 80 percent of the entire cost. Both Billie and my daughter Alix Danielle shared why they set aside 10 percent of all their allowance to pay tithing. “It’s just a small amount, really, when you think that everything that we have comes from Him,” says Billie. When I give my daughter allowance, I make sure I have several 10-peso coins and 5-peso coins to make it easy to set aside for her savings and tithing before she goes to school. That’s just one of the things I learned from many of you guys in MoneySmarts and it has worked really well. I have a feeling our kids will do much better than us. I breathe a sigh of relief and hope. PS. Shoptalk airs shows on personal finance Mondays, 3-4 p.m.
“How do you teach children the difference between wants and needs?” a viewer texted ABS-CBN’s Shoptalk yesterday after host Pia Hontiveros and I spent the better part of an hour talking about financial literacy for kids. The studio lights felt warm on my face and the ticking clock made me mumble a couple of excuses for an answer. My daughter and best critic who was watching assured me I did good, but in the harsh reality of 24-hours-after, I am now mortified at how I missed the opportunity to dissect a very important personal finance dilemma for parents. Forget teaching most adults about wants versus needs. Most of us are hopeless. But children? The spending habits we instill in a child will make more impact on his financial life than any investment he may make in his future. I can’t even begin to explain how critical it is for a child to have a clear grasp of this concept. How? I search inward at my own parenting efforts. Have I been a good example? Have I taken the time to at least discuss the seeming lack of difference between a need and a want at the exact moment the wanna-have-it gremlins are making such a ruckus in his mind? That when he is an adult, he would be torn between bigger things than a Timezone caper or a drum set? That eventually, his decisions now will define him as a person later on? In hindsight, here are the things that I think I should have told that viewer and that I aim to do more often in the future:
- Teach him to delay the purchase and take time to think together. An infant needs instant gratification. When he cries for a feeding or because he hates the feeling of a soiled diaper, or when he wants a cuddle, I believe parents should give it to him immediately. A child, on the other hand, has to start learning the survival skill of thinking first if his desires need to be instantly gratified or not. While foremost a money lesson, this will also later on develop in him the crucial values of sacrifice and giving way to a greater good. So, take time outs. One day or two days will make a huge difference in extracting him from the pressure of the spending situation and teaching him to think about whether something is a want or a need.
- Consider options and learn the art of being a thinking spender. A child is best taught when things are visual. List down possible options. With P5,000 given by relatives last Christmas, what are the things that he can buy? Allow him to visualize and compare prices. Let him think about what is more practical.
- Let him think about long-term goals. Would it be better to save the P5,000 and make it grow so he can buy something he really needs? Try to teach him about compound interest and see if he wants to grow the P5,000 by investing it in a time deposit or a mutual fund.
- Bring him to the grocery and show him how substituting works. Take advantage when the kids want to help with the grocery! At a certain age, they just want to leave that chore to mom. But while they still want to push the cart, incorporate a lesson on how substituting items can bring down the grocery bill. Come to think of it, there have been several times when the kids have saved me a couple of hundred pesos in the grocery.
- Give him rewards when he saves instead of spends. Double his savings or give him treats. Appreciate his efforts when he asks for an opportunity to earn money to “feed” his mobile phone instead of just asking for “load”. When they feel good about doing something, they stick with it longer.
What do you give to someone who has everything?A few Christmases ago, Synergeia Foundation president Milwida Guevara found herself worrying what to give to Washington Sycip for Christmas. Apart from being a well-known figure in the business sector, Wash is one of the reasons Synergeia can do so much work in the education sector, Milwida says. (If you are interested in reading more about this very interesting man, read my favorite professor's blog post on him here. Butch Dalisay finished his biography on Wash Sycip just this year.) After agonizing about her problem, Milwida bought Wash a toy train that moves on its tracks. You know the type, either your son wants one or your husband does. :) âHe was so happy with it, he played with it in his office and called his staff to look at the train,â Milwida told me, laughing. When I asked Mr. Sycip last week about his toy train, his warm laugh spoke volumes of how much he loved it! Finding the right gift is an art. Some people plan gift-giving for weeks; some do it on the day before Christmas Eve. Here are some ideas that would last longer than toys, clothes, iPods or iPhones and could start your loved ones on the road to financial security.
- Savings accounts
- Investment gifts (mutual funds, UITFs, stocks or bonds)
- An appointment with an investment planner
- Books and magazines on personal finance and money management. (MoneySenseâs gift subscription for one year is P648. The address label on every issue will bear the name of the sender. Email email@example.com and include your name, address, telephone number, email, age, company and position. Payments can be made through any BPI branch. Visit www.moneysense.com.ph for more details.)
- Seats to a personal finance seminar
- Money management software
- Your time (a one-on-one dinner in a special restaurant to talk about goals and dreams sounds nice!)
- Donations to a charitable institution
The urge to splurge and miserly behavior are on opposite sides of the spending habit spectrum, but it’s not too hard to imagine most of us swinging from one side to the other at any given time. That’s because everyone has weaknesses. I’m not very particular with electronic gadgets, for example, so I lived with a Nokia 3310 when everybody was taking snappy pictures with their latest model mobile phones. My friends told me that was super miserly behavior. Get me into a kitchen showroom, however, and I will be hard-pressed to don my frugal hat. I “NEED” everything that comes with a nice kitchen, although I don’t know how to cook well! I thought I was moneysmart and was in my safety zone until the kitchen showroom came along. Then boom, sorry spending plan for 2006! This article shares 10 tips to curb impulse spending that we can use to keep us in the right spot in the impulse spending-frugality spectrum. Rina L. says in the article that she needed help because she had to pass by malls every work day to come home from her office. As she buys gifts in preparation for Christmas, she can’t help but pick up items for herself that she really doesn’t need! Sounds familiar? :D (Photo courtesy of Michelle Morelos) Here’s an excerpt, but you can click here for the entire article:
- Recognize a “need” from a “want.”
- Avoid going to the mall if you don’t have to buy something you absolutely need
- Set a budget and stick to it.
- Avoid the sales unless absolutely necessary.
- Tally your actual expenses every month.
- When buying gifts, ask recipients for their wish list.
- Ask a friend or family member to keep you accountable.
- Make yourself busy with other activities. After work, go home straight then just relax by reading a book or watching TV.
- Plan your shopping. If you’re going to shop for groceries, make a list before going to the supermarket. Then stick to your list.
- Reward yourself but don’t splurge. If you have followed these tips after a month or two, reward yourself with something to make you feel good. It doesn’t have to be expensive (remember: you have a budget to follow!). It can be as simple as a trip to the spa or a movie date with a good friend.
I woke up to an ache in my chest as I read the morning paper. Mariannet, the 12-year old child who hanged herself last Nov. 2, was my daughter’s age. She is one of 11 million Filipinos who share a strange kinship with one billion more across the globe who live on less than a dollar a day. Her diary says she killed herself because she lost hope her family will ever get out poverty. Her wish list found in her diary was short: a bicycle, a school bag and jobs for her parents. "Gusto ko po sana magkaroon ng bagong sapatos at bag at hanapbuhay para sa nanay at tatay ko. Wala kasing hanapbuhay ang tatay at nagpa-extra extra lamang ang aking nanay sa paglalaba," she said in her "Wish Ko Lang" letter. [I wish for new shoes, a bag and jobs for my mother and father. My dad does not have a job and my mom just gets laundry jobs.] This morning, as my daughter asked for her baon to go to school, I carefully looked at the P100 bill and kissed her goodbye. She gave me a warm hug and my heart constricted. I saw Mariannet instead, pleading to her father for P100 she needed for her school project. A hundred pesos seems like a very small amount. My daughter will probably spend most of it on lunch at the school cafeteria and candies, not aware it could save someone’s life. A few column inches away from the story on Mariannet, the Philippine Daily Inquirer banner story reads: Senate probes cash gifts. It talks of bundles of cash stuffed in envelopes and brown bags given to politicians one fine day in Malacañang. Right there, we can see that Mariannet was right smack in the middle of the crux of life’s problems here in our country and around the world. Right there, we can raise our fists at government and say where is your heart? Releasing a P1-billion hunger fund is not the real solution! But Lingayen-Dagupan Archbishop Oscar V. Cruz has a better answer. He says when an 11-year old child hangs herself because of poverty, somehow we are all to blame. The community is to blame. The society is to blame. A few months ago, the Asian Development Bank released a study that showed in figures how the rich are getting richer and the poor are getting poorer. The middle class is vanishing, it said. A separate article I was writing made it clear that the emerging middle class in this country are, unfortunately, not in this country but working abroad as professionals, seamen, teachers, nurses, caregivers and household workers. Those in Manila who could buy what they want, send their children to school, save for the future, dabble a little bit in stocks or bonds may feel alienated from the problem of the vanishing middle class. They may say, so what? I have hope. I have money. I am preparing myself for the future. Unfortunately, rising poverty will affect us all. The more Mariannets there are, the less Filipinos there will be who can buy the products and services you are selling. Who can afford to go to school. Who can be skilled workers in our technology hubs. Who can become retail investors that will buoy up our capital and bond markets. As two songs go, the circle of life ensures that we are all in this together. It makes sense for everyone’s financial future to wipe out poverty -- even the ruling elite’s financial future. Even politicians’ financial future. As you prepare this day to make more money, save more and invest more, please do two things: look around you for someone like Mariannet and do something about it. Then continue to make your dreams for financial independence come true so you can help more like her.
Oh you better watch out, you better not swipe, you better not flaunt your shiny new card. Christmas spending is coming to town. Ok, ok, so I’m not the best songwriter in town. :p But the fact is, most of us do have hangovers come January -- the kind that make it so hard to go to the bank to pay our credit card bills when Jingle bells no longer chime. The spendmaster in me talks like a well-meaning conscience: Oh come on, it’s Christmas! What else do you work hard for? The children need the memories, the magic, the gifts, and the ambiance! You can always pay for all the expenses next year. (Voice becoming shrill and high-pitched towards the end of the argument.) (Photo credit: AFP) Oh, that warm, fuzzy feeling that Christmas brings. I am a wild Christmas child myself. When November rolls by, I still feel like a child anticipating the magic of the season. That’s why, I know I need control to avoid Christmas consumerism. I’ve been “starting over in January” every year for the last 10 years. I know that won’t be much fun if I find myself still starting over in January of my 50th year. So here are 15 tips for a pocket-friendly Christmas that are guaranteed to make our holidays (and the months after) merrier.
- Set a budget. Before going to the malls and bazaars, sit down first and determine how much money you can afford to spend.
- Make a gift list. Create three lists: family, friends and work contacts (officemates, clients, suppliers). See which ones you would like to give a gift to, and which ones can benefit from a simple yet sincere Christmas card.
- Determine an amount for gifts. From your budget, set aside a total amount for gifts. Don’t go overboard.
- Set aside money for celebration. Kris kringle, exchange gifts, potluck parties, and Noche Buena costs have to be budgeted too.
- Consider giving group gifts. For instance, instead of giving small gifts to the accounting personnel you always transact with, give a whole bilao of pancit they can have for merienda.
- Go homemade. Give gifts a personal touch by making them yourself. You can do scrapbooks, photo mosaics, and other craft items. Or whip up something yummy in your kitchen, like cookies, paté, and cakes.
- Try shopping online. You will save time, effort, and parking fees if you do your shopping online.
- Hit the bazaars early. Good unique finds that are affordable can be had at village bazaars and tiangges.
- Buy supplies in bulk. Gift wrapping paper, scotch tape, ribbons, boxes, and gift cards can all be bought in bulk at one time. You’ll get a better price too.
- Choose affordable party venues.
- Look out for sales.
- Pay your bills on time. In the rush of the season, people tend to overlook their bills. Pay them on time to avoid interest charges and late payment fees.
- Keep it simple. From gifts to celebrations, you don’t have to overspend to impress.
- Give to others. Make time to give to those who cannot give back, such as people affected by the recent typhoon, children in orphanages, or senior citizens in homes for the aged.
- Plan for next year’s Christmas. To avoid the financial stress, start saving for Christmas expenses in January. If you save a little amount every month for Christmas, you’ll be stress-free next holiday season.