The ‘3 basic laws of money,’ according to kids
MANILA, Philippines – Mentioning finance could be met with yawns and eye rolls. The subject could be sexy, but only for those with more cash to burn.
Based on a recent report by Bangko Sentral ng Pilipinas (BSP), however, the relationship between Filipino consumers and their money may not sound that discouraging. The sum of respondent households with savings rose to 31.6% in the first quarter from 25.7% in the fourth quarter of 2014, as they allocated funds for emergencies, education, health, retirement, and capital and investment. Households grew more confident in their purchasing power at -10%, up 11.8 points from a quarter ago, thanks to lower oil prices and higher family income.
Still, a negative confidence index meant those with a positive outlook were outnumbered by those who held the opposite view.
Meanwhile, less than 1% of the country’s population invest in the stock market, wrote Rose Fres Fausto on her blog, the FQ Mom. FQ stands for financial intelligence quotient.
In the Philippines, the glum sentiment is partly due to the ways finance and investing are presented to the layman.
“What we ‘seriously’ need to do is to find a way to make everyone interested in finance. Not necessarily as a profession, but at least to understand how money works, because everyone has to know how to deal with money,” she proffered.
Making good with her statement, Fausto, alongside her husband and 3 sons hosted a workshop at the SMX Convention Center in Taguig City on May 9, with an aim to show the old and the young that money talks need not be scary or boring. And that, foremost, it should be a family affair.
There were games, interactive speeches, and dancing as a metaphor to the 3 basic laws of money, the event’s main course. These lessons were derived from her book The Retelling of the Richest Man in Babylon.
Each of the Fausto boys shared personal stories of how they applied one of the laws.
Pay yourself first
Addressing parents, the eldest Martin said that kids should be taught to practice saving early.
In 2012, Cartoon Network studied Filipino youngsters’ behavior toward school allowance. The average pocket money for AB homes was P366 ($8.25) per week and for cable homes, P268 ($6.04) per week. 51% of the kids wiped out their weekly funds; 34% put some money in the piggy bank; and 11% asked mom and dad to save the cash on their behalf.
How many parents set up a bank account for their children? 14%. The survey concluded that most of the kids who set aside a percentage of their “baon” or allowance were after buying wants instead of multiplying their money in the long run.
Martin shared a creative way to save up for the boys’ and girls’ big items, like the Sega toy he wanted at 7 – to collect funding through an art exhibit. But any channel would do as long as it would underscore any talent or skill, even their entrepreneurial spirit.
The saving habit will prove more valuable when it is the children’s time to cut the financial umbilical cord, he said. Further, it will be easier for them to understand the right equation once they start working, which is income – savings = expenses.
Get into a business you understand
Rose and husband Marvin, a long-time fund manager, decided eventually that saving was not enough; they had to teach their boys how to invest.
Soon enough, as their middle child Enrique shared, saving and investing became automatic for him and his brothers. He dished out common advice usually heard from older investors: “Know the stock, the business you want to invest in. Do you even understand how they are making money?”
He cautioned against the high-return, no-risk scams out there. And as the stock market is highly volatile, he recommended getting help from competent people, such as financial advisers.
Drawing from his experience, he said that after betting on blue chip stocks like Ayala, Alliance Global, and SM, he also tried upcoming ones like D&L and 8990 Holdings. Enrique had bought D&L shares at P6.38 ($0.14) a piece. He was thrilled that in less than two years, the share price increased to P20.65 ($0.47).
Emphasizing the potential of wealth-building in the stock market, he cited that Jollibee’s performance in the last week of April hit P290 ($6.54), a 60-fold hike from P13 ($0.29), which was deemed a bit pricey in 1993.
Make your gold work for you
“Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it,” said Anton, the youngest, quoting Albert Einstein.
He added that the value of spending and investing is lost if the money earned is spent in haste. Possessing money is not only for spending, but also for having security and comfort.
A directive he learned from his mom is that the only time he and his brothers can buy a luxury item is when they can afford to buy 10 of it.
Delayed gratification, thus, works for the entire family when the members help each other.
Parents must build their children’s confidence in other areas – for the Fausto boys, it has been the area of dancing. This confidence can transcend other aspects, such as decision making and staying grounded when it comes to peer pressure.
“I believe that it’s the parent’s responsibility to help their kids find their niche, where they are comfortable in, where they feel they belong,” Anton said. “If a kid feels that he is enough as a person, if he is confident in himself – I have an identity, this is my thing – he won’t be looking to external things like buying the newest iPhone to feel acceptance from his peers.”
The Fausto boys, young as they are, displayed energy and fire that emerged from the stage to where the audience were seated. “Finance made fun” became not only a mantra, but also a reality that day.
People need to be reminded of how simple the laws are, Rose Fausto told Rappler days after the event. “Simple is not always easy, because it takes discipline, among other things, [to apply them].” (READ: Motherhood and money: Rose Fausto on raising high-FQ kids) – Rappler.com
$1 = P44.39
A freelance business writer, Shadz Loresco follows stories on entrepreneurs, technology, and finance. Her background includes 5 years of writing and editing for online business-to-business (B2B) marketing and reputation management.