Teaching our kids about money and finance is not a tough task if you start early by applying and inculcating simple things and habits in them.
What I am going to share here are broad concepts and the best way to teach kids is always through fun activities that can really help them understand the concept.
Money Talks: Even at a young age, kids can understand the concept of money. You can start talking to them about money when they learn to count and do basic addition. Give them loose coins of 1 Re. and ask them to give you 5 Rs. in return. When paying a bill, ask your child what’s the amount of the bill and to help you add the money that you are paying in cash. This way kids will understand that things don’t come for free and you need to pay for everything you want.
For older kids, when shopping at a grocery store, ask them to compare two products based on the price or teach them why you should shop during sales and discounts. At home, explain them how their simple actions and demands can impact your finances e.g. leaving a light on in a room can cost you in the electricity bill and that they need to be conscious about it.
Allowance: Giving kids allowance makes them feel responsible for the money that they have in hand. Don’t go overboard when giving an allowance. Match it to your child’s age. A 5-year-old can get 500 Rs. a month and a 10-year-old can get 1000 Rs. a month.
Earnings: There are many things to do at home for everyone from big to small. For smaller kids, tidying their room or helping set up the dinner table or sorting their toys can be rewarded with an allowance.
If your kids are teenagers, include more chores around the house or make them run an errand. Ask them to do simple work like pet walking or tutoring kids or siblings at home to fetch an allowance for themselves. This way kids will learn to not only earn money but also value what they have earned.
Saving: It’s easy for a child to point finger and demand a toy but make the buying process interesting for them by giving them an aim to collect money, save and later get the thing for themselves.
For little older kids like teens, you can open a savings bank account and encourage them to add money regularly. By having a bank account, they will learn how to write cheques, withdraw money from an ATM, read their bank statements and understand the basic functionality of a bank from an early age. As kids get used to savings, they will also learn to be discipline with their money and set goals- two financial habits which will benefit them throughout their life.
Budgeting: Think this is tough for kids? Just give it a try. Simple way to make kids understand budgeting is to make different piggy banks for Toys, Books and Clothes. Now ask them to put their money in what they want next. If its toys, ask them to put more money in that piggy bank. By doing this, they will learn the concept of allocating funds towards their goal and budget more for what they need.
For older kids, you can ask them to jot down their source of income and their expenses. Like a high school child would go out with friends for coffee or movies. Make them write down what and where they wish to spend. Encourage them to be of more help around the house to earn more allowance and budget the money against the expense that they plan to make.
Need v/s. Wants: It’s easy to demand a thing that the kids see and want but by teaching them the difference between need and wants, they will understand how to prioritize and spend on what is needed the most. If your kids demand a 2000 Rs. box of Lego, ask them what would they prefer, a box of Lego or a trip to the zoo which was their demand some time back. They will know how a simple box of want can be traded for an experience they need.
Delayed Gratification: There are times when we entre a store to just browse the collection and not buy each time we go there. If you enter Hamley’s or Toys R US, tell your child you are “just looking”. If you are consistent with your message, they will accept it without throwing a tantrum. This teaches them that toys come during birthdays and special occasions and not every time you walk into a store.
For older kids, if they want a play station, take them to the store to see its features and know the price. Now make them save for it and since it is expensive, you too can chip in some amount. The child will know that expensive things take time to come and need to be planned and budgeted for and after getting it, they will value it more as they have paid for it from their savings.
Giving: We want our kids to be responsible citizens in the future and from a young age, make them give a small portion of their allowance as a donation towards a worthwhile cause.
Raising financially savvy kids is not difficult if you follow a logical progression which will allow your kids to gradually understand the concept of money and wealth building. Everyone wants to see their child financially secured and safe when they grow up and like every other habit, money habits when started from an early age can make them money mindful when they grow up.
In topic for my next blog is “Should we hide money problem from our kids?”
Till next time
Mask up, sanitize and stay safe
This blog is a pity of Blogchatter’s A2Z challenge #blogchatterA2Z