Attitudes towards money develop from childhood, as the way parents deal with money influence their children’s financial behaviours.

Young minds should be provided with more clarity and understanding on how and when money “appears”. Having discussions with your child would help them establish concepts they can build on as they explore financial matters such as budget and expense planning, and saving for short- or long-term goals.

With this in mind, here are four ways for children to receive money.

1. Cash gifts

As Malaysians, the concept of a cash gift is applicable to even the youngest of babies.

Culturally, it is common for children to receive duit raya or angpao. Birthdays and other special milestones are also celebrated with a cash gift surreptitiously placed into your hands by kind relatives. Some are awarded money for achieving good results in school exams.

Parents can discuss with their child the significance of the event that resulted in the cash gift. It is also an opportunity to cover topics such as:

•  Gratitude: why we should feel it and how to express it
•  Generosity: will you do the same thing in future for others?
•  Etiquette: why you don’t open cash gifts in front of people.

Parents play a big part in shaping their child’s attitude towards a cash gift and how it should be spent. These conversations should evolve as the child gets older and gains more maturity, gradually allowing them more say in the final decision.

2. Earned money

Earning money is usually fun for children, as the novelty of discovering trading effort for money is exciting.

Children can earn money at home by fulfilling chores or simple tasks. This is also applicable for teenagers or young adults taking tentative steps in the working world.

The capability to earn money is very empowering. It gives a sense of self-sufficiency and boosts confidence. There’s also the sense of accomplishment upon receiving one’s earnings.

There are many conversations that can be held around earned money, such as:

• How payment correlates with skills and effort
• Managing time and resources
• Understanding and ranking priorities
• Discussing work ethics, standards and attitudes
• Explaining the similarities with adult working lives.

Make sure to give wages that are fair. Overpaying can give children the wrong idea on what it takes to be paid well, which could create a bad attitude as they enter adulthood.

3. Doling it out

Doling out money means giving it when asked. As you can imagine, there are disadvantages to doing this, though it does not mean this should never be done.

This method is suitable for young children who are not yet familiar with counting and distinguishing denominations. It’s a good way to introduce the concept of money to them, especially if you use cash and count it with them.

Parents who practise this have better control over the things their child wants to spend on since they determine “yes” or “no”. It could, however, lead to children learning to lie to or manipulate their parents into buying things.

It could also rack up expenses on your end as you might lose track of how much you are giving. Consequently, children do not learn about expense tracking or budgeting, and might form an impression that their parents have an inexhaustible mountain of money sitting in the bank.

4. Allowance

An allowance is a sum you give to your child at regular intervals for their spending. Guidelines for allowances vary from family to family.

You can choose to make it daily, weekly or monthly. You can also set rules on what it can and cannot be spent on, and what payments they should direct to you instead, such as school fees.

Start giving an allowance when your child can distinguish between different cash denominations, is comfortable counting, and has spending opportunities.

Giving an allowance isn’t just about handing over cash and leaving your child to his or her own devices until the next payday. Parents should engage them in conversations to learn how they are handling the money.

There are many motivations for this, such as:

• Learning what your child spends on
• Adjusting the allowance as needed
• Encouraging budgeting, planning, saving and goal-setting
• Helping them avoid scams, debts and money traps
• Teaching them how money and spending relate with feelings
• Practising prudence – needs versus wants, and concepts of frugality and generosity.

The disadvantage of an allowance is the sense of entitlement your child could develop. To counter this, include your child in family conversations on money so they are aware that it isn’t from an inexhaustible supply somewhere.

Keep them well-grounded – if money is tight, this should not be a surprise to your child and they should understand a reduction in their allowance.

This article first appeared in MyPF. Follow MyPF to simplify and grow your personal finances on Facebook and Instagram.