The poor financial habits that many Malaysians have today are often a manifestation of deep-rooted and unresolved issues from their childhood. This has been the experience of Ng Pui Yee, who has been running Little Tauke, a Perak-based early financial education start-up, for the past three years.
Ng, the principal founder of the company, tells Personal Wealth that many of her students, who are of schoolgoing age, tend to have poor financial management habits when they first enrol in Little Tauke’s programmes. It later becomes obvious that these habits were developed over a period of years as a result of mixed messages or conflicting behaviour by their parents.
“For example, we run this ‘virtual bank’ with our younger students, whereby we ask them to ‘deposit’ virtual money. As part of our programme for young children, we set up a hypothetical economy in which children participate using mock currency.
“In this economy, the children are expected to deposit money in the virtual bank, which we create and manage using spreadsheets. I initially thought that they would have at least a rudimentary understanding that money should be saved in the bank, but to our surprise, they were very reluctant to do so.”
It generally takes four to eight weeks before the children are willing to commit to this process, which is longer than expected, she says.
One of her students, for instance, told her that whenever she received red packets from her grandparents during Chinese New Year, or a gift of money for her birthday, her mother would immediately take the money from her, telling her that “the money will be put in the bank” without further elaboration.
This is a seemingly innocuous and good habit to have. A child, however, perceives things differently, Ng says. “For the child, what she experiences is that the gifts are taken away, never to be seen again, and with it, a sense of dissatisfaction and injustice. A young child does not yet understand that ‘saving’ is just one step on the road to developing good financial habits.”
Over time, Ng explains, the child is conditioned to believe that the only way she would be able to enjoy these gifts is if she spends the money immediately. Eventually, this results in a lack of impulse control and spendthrift behaviour.
She adds that the children are always surprised to discover that not only can they withdraw money from the bank, but that the bank actually “pays” them for the privilege of keeping their money. “We introduce children to the concept of saving and the interest on savings as ‘paying themselves’. In this way, we’re gradually able to get them to think more positively about saving,” she adds.
Ng, a former bank relationship manager, founded the company in mid-2017 after she spotted a gap in the local market for financial education that targets both children and their parents. Some years earlier, she discovered the US-based Creative Wealth International, a financial literacy programme developed in 2002. She then made the decision to bring the programme to Malaysia as the country’s sole franchisor.
The business grew quickly and she soon took on a co-founder, Kyle Tan Guang Pin, a former teacher in an international school. The company has since expanded to Penang and Johor. Little Tauke provides three financial literacy programmes aimed at children, teenagers and even adults. This is where Ng believes Little Tauke sets itself apart in the financial education space — the company actively reaches out to both children and their parents.
Children between the ages of eight and 12 are able to join the Camp Millionaire and Money Master Junior programmes. Teenagers up to age 17 can enrol in either the Coming of Age or Money Master Teens programmes. Parents, meanwhile, can choose to attend either the Parents, Kids and Money programme, or the Financial Parenting Workshop.
Catching the problem early
According to Tan, another example of poor financial parenting, in addition to reinforcing poor savings practices, is when parents prematurely bring up the topic of inheritance with their children.
“We had a teenager who attended one of our classes. He had a very lackadaisical attitude towards money, which we found strange. We had a conversation with him and asked about his childhood. We eventually discovered that both his parents grew up very poor, with neither his maternal nor paternal grandparents leaving any inheritance to his parents.
“His parents then worked very hard, setting up a vegetable plantation business, which did very well over the years. They told him at a very young age that he should never worry about money because all their wealth, as well as the business, would one day be passed on to him.”
While this boy was very nice and respectful, Tan says he did not know the cost of things and how difficult it was to make money.
“To gauge children’s understanding of the value of money, I invited the children at one of our programmes to share on their household utility bills. Those who knew said their parents paid a few hundred ringgit a month for electricity and less than RM50 a month for water.
“This young boy, however, said [casually] that his parents paid RM3,000 a month for electricity, and a further RM1,000 for water. The scary part was not that his parents paid that kind of money for utilities; it was that this child had no idea of the value of that amount of money.”
Ng concurs and advises parents not to bring up the issue of inheritance until they are convinced their children are both mature enough and have developed sound financial habits.
In broaching the issue too early, parents risk inadvertently killing their children’s incentive to learn, in addition to stifling their natural curiosity about the world, she says.
“We had a nine-year-old girl who flat out refused to learn anything, and generally refused to even study at school. When we spoke to her, she told us that her grandmother told her that one day she would inherit the family business.
“This girl used to observe her father sitting at the counter collecting money, but she was too young to understand the very real struggles of running a business, and that it was far more complicated than ‘collecting money’.”
While these poor money management habits can be destructive if left unchecked, Tan says children typically are able to overcome these problems quickly. “Children, just like adults, have their own deep-seated issues. However, early childhood psychology holds that problems caught at a young age stand a much better chance of being corrected effectively, and this certainly applies to financial habits.”
Parental involvement is crucial
Parents who send their children to Little Tauke for financial literacy education often have their own unresolved money issues, Ng says.
This is why, she adds, it is so important to get the parents involved in the corrective process. For that purpose, she crafted the six-hour Financial Parenting Workshop. In addition, after each module for children and teenagers, the parents are required to sit in for a quick post-mortem with the coaches in order to discuss the best ways to reinforce newly learnt financial habits at home.
According to Ng, bad financial habits are problems that transcend generations. “I know a mother who suffers from extreme feelings of guilt if she spends any amount of money on herself. When I sat down with her, I discovered that she came from a family of 10 siblings and grew up poor.
“Her parents were extremely strict with the family’s purse strings, and severely restricted the children’s spending.”
Thankfully, Ng says, this parent recognised her own unhealthy relationship with money, and that she was in no position to teach her own children about good financial practices. This was why she actively sought out a solution for her own children, which eventually led her to Little Tauke.
Today’s generation of parents, namely the more affluent Gen X and older millennial demographics, are actively seeking out structured financial education solutions, Tan says.
“The most common reason we’ve encountered is parents themselves admitting to feelings of inadequacy when it comes to sound financial management habits. They are honest and open enough to admit that they don’t know how to broach this issue and teach their children, so they seek us out.
“Another more practical issue is the fact that for younger parents, both tend to work full-time, so there just isn’t any time [to impart financial knowledge]. We’ve largely moved past the generation where the father was the sole breadwinner, so there is definitely a time constraint element that also feeds into a growing need for businesses like ours.”
Also, Tan adds, some families tend to benefit from third-party input in general. Sometimes, the children just do not want to hear good advice from their parents, because there is a perceived lack of objectivity, he says. The same advice, given to children by an independent third party, can often yield better results. “In this regard, we often find ourselves acting as ‘mediators’ between parents and their children,” Tan quips.
It is a role he and Ng are happy to take on, however, because ultimately, what matters is getting both the child and parent on the same page, and having both parties committed to improving their financial management habits.
One key issue that both children and parents could improve on is their approach to pocket money. Ng has noticed that children who are given a daily allowance have no awareness of the need to prioritise their spending. “It does not matter to them if they spend everything, or if they lose the money, because the child has been conditioned to believe that they will simply receive more the next day.”
Using a simplified version of the money jar system, parents could start by giving their children a weekly allowance of RM10, for example. “The parent can have their child put, say, RM3, into the savings jar, RM1 into the sharing jar and RM6 into the spending jar,” Ng says.
The money jar system, also referred to as the JARS money management system, was first coined by author and motivational speaker T Harv Eker. A prolific author and speaker on financial management and wealth, he advocated the creation of a number of imaginary “jars” into which people deposit certain amounts of money for specific purposes or goals.
Incidentally, pocket money has been an issue of particular note because of the broader, cashless trend currently sweeping through the world. While the trend has been largely well-received by consumers and businesses alike, Ng has her concerns.
She worries that the gradual removal of physical currency will create additional challenges to teaching children good financial habits — a task she says is already fraught with difficulty.
“We have found that even with physical currency, it is already quite difficult to teach children to appreciate the value of money. If tangible currency were to be removed entirely one day, that would make the task of financial education even more difficult.
“For example, it would be difficult to teach children the concept of ‘paying yourself’, which is essentially the process of saving money and receiving interest on it. These concepts tend to be quite abstract and children don’t easily understand them. It’s always preferable for them to learn by looking at tangible examples.”
Ng and Tan recently listed Seeding Wealth Asia Pacific Sdn Bhd (the company that runs Little Tauke) on equity crowdfunding platform CrowdPlus.Asia. The crowdfunding campaign, which went live in late August, is expected to end on Sept 24. They are looking to raise a minimum of RM250,000 in exchange for 5.9% shareholding. Ideally, they are hoping to raise up to RM500,000 in exchange for 11% of the company. The funds will be used primarily for marketing, recruitment and the development of their longer-term digital strategy.
Ng wants to develop a digital strategy for the company over the next five years. In that regard, the long-term goal is to eventually evolve into an education technology company, with a focus on digital financial literacy and management tools that can be utilised by both parents and children.
“Besides adding digital extensions of our present offerings, we’re looking at the possibility of developing a budgeting and money transfer system that parents can use with their children,” Ng says.
“Although I do have concerns about the cashless trend, the move is unavoidable. I would rather embrace it and use it as part of our long-term financial education ecosystem. Therefore, a budgeting and fund transfer system that parents can monitor would serve to familiarise children with cashless spending. It would also allow parents to reinforce the financial lessons their children learnt in our classes.”