Whether you’re an expat or a resident of the Philippines, money management is a critical part of everyday life. Those who were born from 1950 onwards experienced a very different financial climate to the millennials and generation Y. Jobs were generally easier to come by and the cost of living in most western countries was far less than it is in 2019. For families in the Philippines and across the world, advising your children on the best way to manage their money is one of the best ways to prepare them for adult life. From personal loans to credit cards, payday loans to mortgages, young people have a lot to learn about how to use credit, so why not offer them a helping hand? Here are Asteria’s best Money Management tips for parents to give their children.
1. Set a budget
This is one of the most basic steps in money management and should always be considered the starting point when discussing financial matters. Explain why budgeting matters and consider providing a few examples from your own household money plan.
2. Understand Interest Rates
Practically every type of borrowing involves some form of interest. This is how lenders make their money. Explaining how interest works should be high on your list of priorities when it comes to offering financial advice to the young members of your family.
3. Avoid Illegal Lenders
Unfortunately, the illegal lending market is still thriving, however, it is essential to let your young people know that they must never engage with organisations such as this. They directly fund violent crime and generally offer interest rates that nothing short of ridiculous.
4. Learn to Save
This is a life skill that will serve your children well for the rest of their lives. Though borrowing is an inevitable fact of life in the Philippines and further afield, the practice of saving for things you want to buy is something that should be encouraged from an early age.
5. Check Your Bank Statements Regularly
With rise of cybercrime and the proliferation of automated payments comes ever more opportunities for people to lose money without realising it. Explain the importance of making regular checks on your bank statement so that your children understand this should be a daily habit, rather than an occasional activity.
6. Develop Clever Shopping Habits
Unless you are one of the very few people who have a great deal of disposable income, the chances are that you will want to encourage your children to save money where they can. Talk to them about how to find the press prices for products by shopping online, buying second hand and avoiding big name brands when necessary.
7. Only Give to Charity When You Can Afford To
Though every decent person wants to help others as much as possible, giving to charity when you already have significant debts is rarely a good idea. Explain that it can be easy to be taken by emotionally charged advertising campaigns or street-based charity workers.
8. Avoid All Forms of Waste
Even without the considerable advantages to the global environment, encouraging young people not to waste money, food, water or any other resource is just common sense. Learning to conserve resources is a valuable life skill that should be taught from an early age.
9. Only Borrow When You Have No Other Option
Personal loans in the Philippines are available at very competitive interest rates, which can make them an appealing prospect. It is important to explain that borrowing is usually considered a last resort or a short-term solution so that your children don’t get into the habit of building up debt they can’t manage.
10. Embrace Technology
In the 20th century, the thought of checking your bank account’s balance without having to leave the house was unthinkable. Now it can be done in seconds, at any time of the day. Teach your children the value of using the various apps and programs that are now available to help people manage their money.
11. Divide Your Salary Before Spending
Whether this is something you do by using an automated app or a physical pen and paper, it is something that should be encouraged as soon as your children start earning. Its very easy to spend your first paycheque on frivolities and unnecessary luxuries, only to realise you haven’t left any money over for food and bills. Spend some time sitting with your children to show them how to do this.
12. Learn About Your Credit Rating as Soon as You Can
Young people with no credit history will automatically have a low credit score, but many lenders will still offer products to people who are over 18 and have a regular income. Teaching your children about how credit scores work means they can get the best value for money when they do choose to apply for any kind of financial product.
13. Payday Loans Are for Emergencies and Short-Term Use Only
This is perhaps the most important piece of advice on the list. Even if your young people find it difficult to understand the nuances of interest rates and borrowing in general, explaining how payday loans work will potentially save them from difficult and unnecessary financial situations.
14. Never Try to Borrow Your Way Out of Debt
As anybody who has tried this will tell you, it is impossible to borrow your way out of debt. Make sure that you explain the importance of maintaining a consistent income to your young people so that they understand this isn’t an option.
15. Only Borrow What You Can Afford to Pay Back
The simplest of all the points on our list, but arguably, the most important. Try to instil this message into your children as early as possible so that they don’t end up in unmanageable debt. Though it may seem like common sense, it is always worth making a point of this, so they don’t forget.