Wealthy Living: Giving Your Kids a Financial Head Start

Contributed by Melvin J. Esteban, FLMI, AFSI, RFP, CFC

Do you know why people find it hard to save? My take is very basic: we don’t have the right fundamentals. I believe that as kids, we should already be taught the value of savings and money. In fact, I believe it should be a requirement of every school.

If a parent or teacher asked me for advice, I will always tell them to make sure that their objective is not only to teach the kid how-to’s of saving, but also make sure the child is motivated by it. It will be a struggle if you keep on investing the money and kids are resenting you for it.

I had the opportunity to open my first savings account when I was in first grade—a “Happy Savers Club” account in Banco Filipino. I was motivated because every time I made a deposit, I got a prize. At first, my mom accompanied me and explained the rewards, but soon I just went to the bank by myself. For me the experience was like going to a toy store without spending money. And unknown to me, it gave me the discipline to save. By the time I reached third grade, I was already able to open my first time deposit.

Banks will be the best starting point. Open up a kiddy savings account. Almost all major banks have one. When you do this, make sure that you bring along your child. Make this a fun learning expereince for him. Make sure also that the bank is close to your house because eventually you want him to do it voluntarily.

As the fund gets bigger—say Php5,000—you can now start to look at transferring the money to a time deposit account. Use the opportunity to explain to him the concept of not touching the money for a time and in return, his money will grow faster. These two lessons alone can go a long way in motivating your child to save. As you progress from this, you may want to look it other investments like mutual funds or UITF.

A mutual fund company offers the first one while the latter are offered by banks, but otherwise they are quite similar. The basic concept of this product is that your money is pooled together with other people’s money to make the fund bigger. This will allow the manager to diversify the investment, giving the fund a higher level of return with a lower risk. You may also need to choose from a different array of funds like Bond fund or equity fund. I personally prefer the Bond fund, as this is safer and has a fairly good return in the long run. Remember, your objective is not to make a lot of money but to make consistent money. If you keep on looking for an investment that makes a lot of money, surely, you can also lose a lot of money.

Lastly, you may want to look at stocks or equities. Though it’s normally perceived as a risky investment, in the long run, you are most likely be much better off. Limit your choices to the blue chips. I personally like SMIC, Ayala Corp. and BPI. This money is intended for your child’s long term needs, like for his college education or graduation gift or seed money for his business in the future. Please do not play the market. Do not buy and sell the stock every month or every time your brokers tell you to. It’s only the broker that will become rich because of all the commissions he’ll get. The secret is patience. For as long as you stick to the best company, you shouldn’t mind the volatility in the middle.

There are a lot more investment choices out there but the trick is to have a good mix of these instruments.

Here are a few more suggestions I like to share.

  • Learn not to give your child too much allowance money. I always like to encourage parents to prepare “baon” or packed snacks and lunch rather than give him food money. When you’re in a grocery, ask him what he wants so he will look forward bringing that to school. Not only are you feeding him nutritious food, he also won’t get used to the notion that money is freely given.
  • Assign weekend task before giving him his allowance. It may be as simple as feeding the dog or cleaning his room. This helps develop the value that money is earned.
  • When giving money, show him how to put a portion directly in a piggy bank and eventually in the bank. Let him keep the passbook so he can see that his money is growing. Explain to him the concept of his money making more money or the concept of returns. The earlier you can impart this value, the better. I was introduced to this concept at the age of 10.
  • Finally, set a goal for his saving, such as a toy for the Christmas or a bicycle. This way he will have something exciting to look forward to. This develops delayed gratification.

Saving may be a very big challenge for a lot of parents, if they themselves don’t have the habit. How can you teach something you are not even doing? But as a final note of encouragement, you are doing a good thing here. More than the money, the child learns the value of savings and good stewardship. Make this is a family thing. Make it as a fun activity and lastly, stay committed!

Happy Wealthy Living!

Melvin J. Esteban is CEO of Motivating Minds, one of the leading consultancy groups in the country. He is the first Filipino to win the prestigious “Young ASEAN Manager Award” given by the ASEAN Insurance Council in 2007; and was the youngest to achieve vice presidency during his stint in insurance at AIG and Philamlife. Melvin has over 14 years of experience in the financial services industry, working in financial services marketing, product development, and strategic business development. You can reach him at mel_esteban@yahoo.com.



  1. wow, third grade?? i don’t even have a time deposit NOW hahaha. (but i have insurance..does that count? LOL) thanks for the tip! now…i wonder if i’ll pass for a kiddy savings account… ;p

  2. hey diane! good tips, huh? i’m really trying to internalize this–i’m one of those parents who don’t save! as for your kiddy savings account… no comment 😀

  3. hi ree! thanks for these great and inspiring tips =)

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