- Date : 10/09/2020
- Read: 4 mins
We spend so much energy to ensure that our kids are successful in life and become independent, but hardly ever give a thought to equipping them with sound financial habits. Let’s change that.
All parents want their children to grow up to be smart, educated and well-informed citizens who live their lives comfortably and responsibly. To achieve this aim, parents spend tons of time and money to send their children to the best of schools, pray that they get into the most prestigious of colleges and after that, hope they find a job that pays them well enough so they can become financially independent. All the while, they simply assume that their children will tacitly learn about an extremely important thing – money itself.
Of course, children do pick up what money is and the basics of how to use it fairly easily. But it’s not just about how money works; parents need to teach their children how to use money wisely. Bad financial habits can land your children in great trouble, irrespective of the salary they’re earning. It is therefore up to parents to instil sound financial habits in their children and start doing so from an early age.
But before we tackle the question of when should you teach your children about money, it is important to know exactly what you should be trying to teach your children. The following are some basic financial rules that your children must be made aware of -
Teaching your kids about earning money the right way may seem obvious, but it carries a deeper life lesson that they must learn. Children must be taught from an early age to earn money in an honest and responsible manner and most importantly, not get lured into earning it by fraudulent means.
The most important money management lesson you will ever teach your kids is about the importance of savings. Instil in them a habit of saving money from a young age and when they grow up to be adults they will surely use their earnings to gather sufficient savings.
Explaining to your children the difference between wants and needs is a great way to ensure that your kids aren’t blind consumers who buy everything advertisements tell them to. Smart buying will help them save more and hence, make their earnings count for more.
This might not seem an obvious money lesson, but teach your children to be compassionate adults who do their bit for helping others. Getting involved in various charitable organizations is a great way for kids to learn that earning money for themselves isn’t the most important thing in the world.
With the backdrop of these basic financial rules, we can go about instilling in our kids the value of money from a young age. Here’s a simple guide –
1) From ages 4-8
This is the age when children can begin to grasp the basic concepts of how money works. For your part, taking your kids to the supermarket and giving them a glimpse of how monetary transactions take place will acquaint them with the acts of buying and selling. You can even play games that incorporate money into the fold to teach them the basics, like Monopoly or Business.
2) From ages 9-15
During this period, your child is ready to start receiving an allowance, which is a great learning opportunity for them. Their allowance is effectively their earnings (you can introduce bonuses for extra chores done!) and they must learn how to manage their allowance in a responsible way. In order for them to do that, they must learn how to save.
Several banks offer children’s accounts which are ideal ways to teach your children the importance of saving. The idea of savings can be made lucrative by explaining to them the concept of interest and how the bank rewards people for saving more money.
This age is also ripe for your children to start getting a grip on managing their finances by making a budget for their allowance. Equally important is to teaching them how to buy smart – ensure that they compare the prices of different commodities before buying and only buy things that they truly need.
3) From ages 16 and up
At this age, your children are smart enough to understand how plastic money works- debit cards, credit cards, ATMs, etc. It is also imperative that you teach them that when they use credit cards, they aren’t buying things with plastic; they are merely delaying payment on which an interest is applicable. This should ensure that they don’t binge use their cards and run through all their credit. The nuances of using cards in place of cash; the task of keeping information private and being aware of its presence so it can immediately be cancelled in case it gets lost.
These money management habits must be instilled in children from an early age so they can grow up to be responsible and careful spenders.