Christmas and New Year are around the corner, and we all will be making New Year resolutions for ourselves and even for our children. Why not think different this year, helping your young ones to develop knowledge and skills to handle finances.
Money is a necessary tool to live and survive in society. Managing finances is an art and an imperative one to learn. Many of us often ignore, sweep it under the carpet or do not understand financial challenges.
But we certainly do not wish our kids to face the same when they are of our age. Equipping your children with the knowledge of money will not only make them meet their financial challenges but also capacitate them to handle the circumstances in their life.
That’s the ultimate job of a parent, to equip your child to survive the race of life. In any case, if you don’t, someone else or from somewhere they will start learning, which might not be in best of interest for them.
Therefore, let’s discuss some of the ways and things to get you started.
- Spending and Saving
There isn’t any need to teach how to spend; kids pick it up on their own. On the other hand, saving is something that they can never learn on their own.
Teaching them to balance between spending and saving is necessary. Create two jars/boxes and call them a spending account and saving account.
Whatever money they get (pocket money, monetary gifts, etc.), make them divide and put the money in both the boxes. Tell them that the savings jar is for producing more significant and occasional purchases.
With time they can also be taught to vary the portions being put in the boxes, i.e. saving more when there are lesser expenses and vice-versa.
- Set spending goal
Like we do with our finances, we make goals and then walk towards it step by step. Teach them the same.
Set purchase goals for them, ask them what they wish to purchase, and help them with the money required and how much would be needed to save and in how much time. This will teach them to plan and follow it in the time frame to achieve the goal.
- Short term vs. long term goals
Another critical concept to be introduced is of short term and long term goals. Any expensive purchase in the bucket list of your child, associate it as a long term goal and encourage them to save it up for it.
On the other hand, regular purchases, which maybe aren’t that costly and recurring too, could be termed as short term goals.
This will teach them to make choices, to maybe skip some of their daily or trivial expenses and save it for long term purchase goals.
- Make them take financial decisions
There isn’t any better way to learn on the job. When your kids get little older, start involving them in basic household financial tasks, such as shopping during the festival time, buying groceries etc.
You can even make them responsible for a task, i.e. provide them with the weekly budget and making them accountable to decide and buy fruits for the house.
This way, they will not only feel included and responsible but also learn to participate and make financial decisions.
- Once your child grows up and learns the primary way of saving and spending, you can even open up a savings account for them and ask them to put aside some money every week or month to be deposited in the account.
Explain and make them understand how savings account will let their money grow with time.
- Involve in financial discussions
Do not keep your children away from the household financial discussion. Involve them in the discussion once they grow up enough to understand.
Please encourage them to take part and keep their point of view too. This will build their confidence, make them feel involved and responsible; they will listen and understand how the elders consider various factors while planning and deciding for any purchase of saving for future purchases.
Describe the situation and their terms & conditions to children. Thus, they also learn to cope when their favourite toy gets broken or needs to be replaced. Would they be having enough money saved for this exigency?
- Help them track their finances
It is essential to learn to keep track of your finances. Spreadsheets or spending apps will not be suitable for your kid, but maybe keeping a small diary with columns made where he/she is noting the expenses by dates.
Teach them how to total them at the end of the week and analyse how much is left and tally or reconcile with physical money left with them. When they are educated to track money at an early age, it is easier for them to do so their entire life.
Especially for the long term and expensive purchases, you can introduce the concept of easy loans by lending some money and putting terms and conditions regarding the return of the money in the specified time frame.
You can go away with interest, but this practice will teach them to take loans and more importantly, to return them on time and not to create bad debts.
Description: In the blog, the importance and tips are given to teach your children the importance of money.