Financial Aptitude Begins At Home

You can turn your living room into a live learning ground for your children, even where the complex subject of business finance is concerned. So says Steven Teng, CFP, who believes that financial aptitude begins at home. The father of three shares with My Child Malaysia his views on how to raise financially savvy children.

My Child: At what age do you think children should start learning about finances/financial planning?

Steven: Most children would have learnt about money by the time they are in kindergarten. When it comes to financial planning, I think 12 or so is a good age to begin. If the child’s parents are businesspeople, then the family business would be an ideal starting place for their child to learn about finance in a real-world setting. Entrusting the child with small responsibilities or a minor assisting role enables him to gain valuable insights. At the same time, it is a safe environment for the child to gain firsthand experience under his parents’ guidance, where any mistake he makes would not end up too detrimental. Where else would any child have the luxury to fail while learning, with a safety net beneath him?

My Child: Why is it important to start charting our children’s financial development at a young age?

Steven: Building up good habits requires a head start – the earlier the better. And of course, the tangible benefit is that the initial sum of money you set aside for your child will multiply exponentially through the effect of compound interest over the years. Your child will definitely appreciate it!

My Child: What are the practical ways of exposing children to business finance/financial planning at home?

Steven: Encourage your children to play games such as Monopoly or cash flow games by Robert Kiyosaki. Let them read magazines like Personal Money and Asian Wall Street Journal or even The Star Business section. Introduce your teenagers to books by investment maestros such as Warren Buffet and Peter Lynch, or read stories about successful entrepreneurs. If your children are too young to read such books on their own, you could narrate those stories in the same way you told your children how Newton discovered the law of gravity or how Archimedes had his eureka moment.

My Child: As the parent of three children aged 14, 15 and 17, can you share actual examples of how you have instilled values such as thrift, prudence and moderation in them?

Steven: When my children were young, I tried explaining to them the practical meaning of basic business concepts such as assets and liabilities, using examples of companies they could identify with. For instance, they watch ASTRO programmes, so I would tell them about what it means to own shares in ASTRO. Every month when you pay ASTRO subscription, it is a liability to you. Whereas as a shareholder, the dividend you receive from ASTRO is an income or asset.

Alternatively, I would explain to them about the funding of luxury purchases by residual income. For instance, the rental income you gain from 10 taxis (asset) may be used to fund your personal Mercedes Benz (liability). Or the rental from your shop lots (income/asset) can fund the bungalow you reside in (liability). By highlighting that you need to have income first before you can afford to pay for what you spend on, the above examples illustrate the importance of thrift and prudence.

When it comes to technology-related products like the mobile phone, I advise my children that it’s not necessary to continually upgrade to the latest model. Even in the case of the much anticipated 3D television, you can always wait for its price to drop.

Once my children were old enough, they would accompany me to business seminars, for example, real estate investment talks about Malaysian property or property in Australia. There are a lot of free informative seminars held at accessible venues such as KLCC, Mid Valley Mega Mall or leading hotels. Ho Chin Soon’s seminar on real estate is a fine example that comes to mind.

To take learning even further, my family and I went for a Middle East holiday-cum-study tour a few years ago. Besides discovering the rich culture and history of the countries we visited, my children observed firsthand how global, geographical, social, political and economic factors could impact one’s personal financial standing.

My Child: What do you think about Malaysian youths’ financial aptitude?

Steven: According to a survey by The Star and Youthsays (see The Star dated 14 March 2010), 96% of 1,678 participants below 30 express their desire to become millionaires by age 35. This indicates that many young Malaysians are at least aware of the significance of being financially free. – MCM

About Steven Teng Kian Teck

Steven Teng is a qualified electronic engineer and Chartered Financial Planner. After practising as an engineer for several years, Steven decided to pursue a career in insurance and has not looked back since. Today, he has garnered over 25 years in the insurance and financial planning industry. Steven resides in Cheras, Kuala Lumpur with his wife, Cheryl, and their three teenaged children. You may contact him at 019 3369 856.