Good habits start early.
The Venn diagram of You, Your Kids and Your Money is one
circle. It’s not only essential that you should consider teaching your kids
about money, but financial experts advice that YOU MUST!
Some of you might be wondering – Why?
Well the simple answer is this: If you don’t teach your kids
about money, who will?
You might say the schools will, but the sad truth about our
education system shows otherwise. Yes, the schools will teach your kids will
about Trigonometry, The Tropical Rain Forests and about Wordsworth and
Tennyson, but they will not teach them the art and science of money management.
It is completely in your hands whether your kids are going
to be managing or damaging their financial resources.
What’s more, how you manage your money is the most important
influence on how your child will deal with it as an adult. Most children grow
up to into adults who cannot save, spend or budget, because their parents
failed to impart essential financial knowledge down to them.
We know that as a parent you might have talked to them
already about savings, but we’ve pooled in some other important principles you
need to cover. So, here are certain essential dynamics of finance that you need
to teach your children:
your kids that they might have to wait to buy something they want should be the
first financial management lesson you teach.
This lesson should be taught as early as 3 to 5 years of age
and you can never start too early, because patience is a trait that gets harder
to nurture as one grows up. So, the earlier you start, the better!
This will teach them patience, saving for a goal, and
rethinking on their expenses carefully. It ensures that your children do not
grow up to be impulsive, emotional buyers, and will be smart, intelligent
consumers who prioritize their needs and wants.
However, make sure that you do not set a goal that’s too
far! Making them save for six months, for an expensive toy will frustrate them
easily, and they will begin developing negative thoughts about saving.
Invisible Money: Money can be a very complicated
concept for a child to wrap around his or her head – especially in this fast
growing digital world. As a parent, you need to understand and acknowledge all
the difficulties that your child might have.
Think about it – when you were young, money was a much, much
simpler concept. But today, with credit cards, Internet banking and online
shopping, children don’t actually get to see us buying products and services
with actual cash of notes and coins anymore!
So, it is more important that you talk to your kids about
this non-existent ‘invisible’ money – and make it existent. And it is also
essential that you choose the right place and time to talk about this.
Some places that you can effectively do this are: At the
ATM, while you’re shopping at the Supermarket and paying with your card, when
you’re paying bills or when you buy them a book from Flipkart!
Budgeting: From a financial point of view,
it cannot be emphasised enough how important it is to involve your children
when you are doing a budget. This is one of the primary ways you can talk to
your children about money, and costs and spending.
Explain to them how much money the family has, what you and
your spouse earn, and how much the family spends every week. Give them an
insight about how much every day products and services such as food, petrol,
electricity, and movie tickets etc. cost.
Fun tip, make a mathematical calculation and show them how
much you need to save every week so that you can afford their education or make
a percentage of how much of your income goes into their school fee. This might
make them appreciate the privilege of a good education that you have given them
and will motivate them to put more effort into their studies.
Teach them to budget and allocate their own pocket money.
Include your children in certain financial decisions. Take
them with you when you do shopping, and explain why you chose a certain brand
of milk over the other, and teach them smart buying.
Ask them out loud, about some of your everyday judgement.
Question them, ‘Do we really, really need to buy this?’ ‘Can
we skip this expense since we are going for a weekend to Ooty?’ ‘Is this the
only option I have to buy this product, or can I buy it elsewhere cheaper?’ and
observe the answers that they give.
Encourage them, if their answers are acceptable by
implementing their suggestion. If not, explain how else it can be done, but be
appreciative and positive of their answers either way.
SAVINGS: Teaching your children to save,
will teach them that you need to make choices about how to spend your money. Tell
your children that money is finite. When they are young, make them realise that
when they spend the money they save, they don’t have more money to save. This
gives them a sense of importance to values such as patience and
Introduce them to the concept of Compound Interest. Tell
them, ‘The sooner you start saving, the faster your money can grow on
BEING PREPARED: Insurances and investments can be a tough
concept. Even for an adult the financial jargons might terrify them, but make
sure that your children know the value and importance of an insurance. Teach
them why you pay your annual premiums. Talk to them about all financial threats
that might befall in case of an unfortunate incident. This will teach them why
it is essential to have the lives of their dear ones covered, and how
incredibly an insurance works in order to secure their futures financially.
Being sensitive and careful while dealing this subject, is
also important. Making the child understand about emergencies and what happens
after, without instilling emotions of fear and panic, is a tricky business. But
you need to do it, nevertheless.
What’s more, secure your child’s future by carefully
selecting a Child Insurance
plan for them, and talk to them about it. Tell them how the money works and why
you had chosen a particular plan. And when they are a little older, discuss
about comparing plans and how to make the right decision. Give them a detailed
report of your past experiences and make sure they learn from both your success
and your mistakes.
Introduce them to the various online portals that help
compare insurance plans, and teach them how to calculate maturity in such apps
Thus, all the financial tricks that you teach your kids at
an early stage will stay with them till the grave.