Introduction
Readers, here I share my tips on how to make your kids – money-saving experts! I believe imparting real-life money skills in children prepares them to handle money effectively in real life. They will find it easier to manage personal finances in their adult life. It will help them to learn the value of money and develop the right skills to make responsible financial decisions.
A wonderful aspect of parenting, for me, is that it allows both parents and kids to evolve. While the kids grow into responsible adults, their parents evolve with new understanding and knowledge.
From being inexperienced to being understanding and patient, yet at times worried, as parents, we go through it all.
And in this process of evolution, every single day we try to teach our children practical life skills. This with the hope that they’ll grow up to become confident adults. And amongst all life skills, financial skill is an integral part of this process.
As banking is a part of my routine work, I make a conscious attempt to impart financial knowledge to my little boys. However, many questions did bother us, such as – do we really need to talk about money with the kids? Will they feel burdened if we discuss money matters with them? Aren’t they too young to introduce them to saving, budgeting, financial planning and investing? Isn’t this the time when they should have a happy and carefree childhood? Most of us ponder these questions when we think of teaching kids about money, and I was no different.
Educate your kids about money
Educating children in money management is becoming more important in the current scenario of a pandemic ravaging the economies across countries. Many of us are either under the threat of losing jobs or have already been made redundant. Our children too are becoming aware of this financial strain.
I believe that educating children on financial skills should start at an early age. Children are always full of curiosity and eager to learn new things almost every day. The real magic trick is to make the whole process fun, interesting and entertaining so that they don’t lose interest or find it bothersome. I personally believe fun should always precede education when we are with kids. I mean, many of us would agree that talking about financials bore even the grownups sometimes.
1. The story begins with the Piggy Bank:
We gifted our kids their first Piggy Bank when they had the first lesson about money in school. My husband and I, have a habit of keeping all small changes in a transparent storage jar of our own. So, it wasn’t difficult to show them where to save the small changes and how they grow when you start saving them. Children have their preliminary lessons on life skills at home. Mostly, they learn by imitating and copying others around them. So, it becomes really necessary to start them off on the path of saving and handling money. And a piggybank really helps!
2. Knowing the priorities: The game of needs and wants:
As parents, we get anxious that our kids may not understand the value of money in today’s world. Nowadays, with easy access to money and things that money can buy are in abundance. So, it is really very important that they can differentiate between the ‘needs’ and ‘wants’. This will help them set their priorities and know where to spend their money.
Need: It is something which is essential for life, a necessity, something required.
Want: It is non-essential but wished for, a desire.
Using these definitions kids can be taught financial discipline. We have made it a game for us. We list down few items and ask the kids to classify them into wants and needs.
The kids loved it and so we played it a lot. In fact, most of the days, while we are in the midst of a simple action such as drinking water, we spring the question “Drinking water- say Need or Want?” when they answer it, then out comes the next- “what about the fizzy drink?”
3. Example is better than precept-An apt idiom to practice:
The primary education on all life skills begins at home. And children learn by observing and copying or imitating their parents.
So, as a parent, if you love spending on things that aren’t necessary, your kids will learn what you practice and not what you advise.
Maintaining a certain amount of financial discipline by parents bring the same sort of financial behaviour to their children. Teach them early on that just because parents can afford it, they should not expect to get whatever they want all the time!
A common demand from kids that we face on many occasions is “my friend has a certain gaming console or mobile phone” etc. Well, peer pressure is definitely there but we must make them understand what is within their limit of expense. It is also important to tell them why not!
4. Let them choose. Make them choose the best:
Here’s an example of what I am trying to say. My sis-in-law talked about her fitness-crazy teenage son, who wanted to buy a pair of trainers for both of them. However, before going shopping he had done thorough product research and comparison. What impressed me most was that their son knew more about shoe brands in the showroom than the salesperson. It is the most important lesson for the child to know and appreciate the value of money. They should be able to understand whether it is worth their money to buy an item and be on a budget. I am glad that my dear nephew has learned this lesson much early in life.
5. Tell them about banks, ATMs, cheques, credit cards:
For us, our introduction to banks was made when we were teenagers! We were allowed by our mother to go to the bank for depositing money in savings and recurring deposits. Although it is different for my kids, as I am related to banking, they were introduced much earlier.
It is essential to introduce a child to banks and all their related services before they fly the nest. Today, everyone has bank accounts and most transactions happen through alternative channels and mostly at the swipe of a smartphone. So, it is very convenient to introduce a child to money management, provide financial independence while virtually supervising them.
6. Involve them in the family budget.
A person who is good at budgeting most often leads a life of financial bliss. However, perfecting the budgeting skill doesn’t come naturally to everybody.
We tend not to involve children while discussing the budgets of the family. But I believe parents must encourage their children to be financially smart. Show them what are expenses and savings, and what ratio should be maintained between both, for them to remain debt-free.
As a thumb rule save 30-40% of your earnings. So that if and when you need, you have a safe financial cushion to fall back on.
So why not discuss and plan the next holiday together with the whole family. Decide together on
- Where to go,
- where to stay,
- what places to visit,
- what all things needed to buy before the trip,
- how much to spend,
- how much to be kept for spending on buying at destination shops etc.
Careful budgeting skills will help them to manage their money efficiently once they are in college and even after that.
Conclusion
Like all lessons of life, the lesson to expertize in money management also comes with practice. Learning to balance between income and expenditure is not a lesson for kids. But as parents, probably we are the best judge of our kid’s development. Hence we should also be the ones to decide when to introduce them to financials.
However, whenever you decide to begin financial education, start in small and practical doses. This will prepare them to earn professionally and spend judiciously and save and invest dextrously.
Disclaimer: The suggestions and materials presented here should not be regarded as financial or investment advice and are only for general information. The author and the publisher are not registered, financial advisors. The information/advice rendered herein should never be used without consulting financial professionals. By reading and using our content available herein, you are demonstrating your consent and agreement to our disclaimer.
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Useful! The very detailed post and explanation were great. I had a great learning experience. Thanks for such a really useful resource. Keep it dear! keep sharing such amazing things.