A child learns from parents. That said, it is the duty of parents to teach kids about money management. In fact, you can help them prepare wisely, by doing simple exercises. These involve managing school activities, pocket money or sending them out to buy products. All of these can help a child develop smart money habits. Archit Gupta, Founder & CEO ClearTax said,
“Teaching your kids how to manage money is vital in today’s day and age. Managing money is something even adults grapple with, giving them an early head start will help them make fiscally wise decisions later in life.”
Gupta laid down few tips that’ll help teach your kids how to make financially viable decisions:
Slowly introduce the concept of budgeting to your children. No matter how small an allowance you choose to give, ask your kids to keep track of how much they spend and where they plan to spend it. Inculcating such habits early on will prove to be beneficial later in life. Once they start earning, they’ll be able to manage their income better.
Meanwhile, Javed Tapia, Founder Slonkit which is India’s first money management app for parents and teenagers said, “Once they understand the benefits of saving and start doing the same, teach them budgeting. Guide your children to document their expenses and ask them to set monthly budgets. If needed, help them categorize their expenses, put a limit on spends in each category and monitor their expenses across categories.”
Avoid giving allowances to your kids. Try paying them commissions based on chores they do around the house such as taking out the trash, cleaning their room, or watering the plants. This activity will help them understand that money is earned and not just handed over.
Also, Tapia adds, “It’s important to give children some money to manage. However, ensure that they have earned it. Offer your children an allowance on completion of a set of household chores. This could be as simple as setting the table for dinner.”
Avoid impulse buys:
Try not to give into all your children’s whims and fantasies. If they make an impulsive demand, ask them to be patient and reason with them as to why they need it. Instead of giving in, encourage them to wait. Delayed gratification helps develop patience in your children as well as prepares them to make level headed decisions.
Additionally, Tapia had also highlighted few pointers which can help children be financially fit.
Set goals for your children:
How about setting goals for your children and rewarding them on successful attainment? Throw in small challenges to get your children excited about earning the money that she/he would manage. The goal is usually an activity that consumes a significant time. It could be scoring good grades in exams or learning a new language. If the child is rewarded with monetary incentives for attaining these goals, they will value the money they earn and translate it into meaningful spends.
Cultivate the habit of saving:
Take your children shopping and show them one lower priced and one higher priced toy. Explain that in order to buy the more expensive item, they will have to save their allowances.
Advocate thoughtful spending:
Encourage your children to be thoughtful buyers. Irrespective of the cost of the purchase, urge your children to scout for better options, negotiate with the seller and get more value for their money. This enables children to use their allowances in a better manner. By doing this consistently, they can develop a habit of valuing money and using it judiciously.
Set a good example:
Ultimately, you’re the role model for your children. If you’re spending mindfully as per your needs, the same will be understood by your children and they are highly likely to follow in your footsteps.
Finally, Gupta says, “Educating your children about money will not be easy, but if you follow these steps, they will surely be successful when they get older.”