Teaching Money To Kids And Making Them Financially Independent
Against such a backdrop, it has become an imperative need to teach our children the value of money.
Just like we teach our children healthy eating habits, how to stay physically fit, imparting basic financial lessons is essential too. As parents, we agree that it’s our responsibility to invest for our children's future. Similarly, it’s also our job to teach our kids how to budget, spend their money wisely and save for their future so that they grow up to become financially independent. How do you help them master essential money management skills? One of the best ways to start is by developing the quest to achieve financial independence at an early age.
It would be fair to mention that the world has begun to adopt the idea of a cashless economy. So have our children. Let’s look at it this way: children get pocket money from parents in form of cash but their spending has been mostly online such as ordering food or purchasing games. In fact, several times, kids spend online, borrowing their parents’ debit/credit card with parents having little visibility or knowledge of where and how much of their money was been spent. This has accelerated further with the onset of coronavirus pandemic and subsequent lockdowns that forced children to stay inside their house, stopping them from going out to play and meet their friends.
Against such a backdrop, it is imperative to teach our children the value of money. This should start when they are young. How? To impart financial knowledge to our kids, you may do the following:
Communicate to make them financially literate: While they are still young for in-depth money lessons, don’t hesitate to involve them in family finances and explain to them the importance of financial responsibility and independence. Talking about financial health is as necessary as discussing physical and emotional well-being. Also, there are four essentials our child should learn at an early age: earning, spending, saving, and donating.
Also, when kids start learning about buying, selling, profit, loss, interest, and other financial terms in their mathematics classes; demonstrate the same in real. This will develop their interest and make it easy for them to understand to spend money judiciously from time to time.
Teach them to create a budget: When you are creating your monthly budget - including or excluding items - explain to them what you are doing and why. When children understand the difference between what is necessary and what is not, it will help them build smart spending habits. Learning how to budget is one of the most important skills leading to lifelong financial success. You can also let them do budget-related household activities such as planning a week’s grocery, shopping for the groceries while sticking to the grocery budget.
Instill in them the discipline of saving: Along with budgeting, saving is another skill that plays an important role in lifelong money management. Many children do not have a real-world sense of the value of money. For instance, they lack the knowledge to differentiate between ₹10 and ₹100. Also, in the age of instant gratification, where parents meet their kids’ requests immediately, values such as needing to save up diligently to buy their dream purchase are missing. Therefore, imparting knowledge about savings and investments is vital. What you can do is gift them two piggy banks — labeled “fun” and “save” — that they split their money between. This inculcates the discipline of saving.
Show them that work is rewarding: In the COVID-hit world, most of the families are needing to do household chores themselves, with lesser dependency on house helps. In such a scenario, parents can seek help from their children assigning them domestic tasks such as making their beds or doing their dishes, etc. Once the task is successfully completed, they can be rewarded. This is a good way to encourage them to pick up necessary skills that will also help them become self-reliant in the future. Moreover, receiving financial rewards in exchange for performing work with precision gives them a taste of the real-world.
Help them set financial goals: Often teenagers wish to contribute to society through certain projects. Sometimes, it also becomes tough for youngsters to figure out what he/she wants to accomplish financially over a time period. Sit with them and talk about their financial goals and aspirations thereby guiding them to wade through such dilemmas.
Learning from mistakes: When children first start managing money, they are bound to make some mistakes or a wrong choice in investment. But, what’s essential is to learn from those mistakes and ensure they don’t repeat them.
Therefore, as important it is to have financial security for your children to secure their future, it equally valuable to teach them financial independence. Money management skills will help your kids make prudent decisions and execute wise practices. Indeed, it will make your children financially smart and give them the ability to weather difficult financial times, if any, on their own with confidence.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house