As kids grow, they notice that money is an interesting tool that gets them what they want when they want. However, a kid that is raised watching money from this limited perspective could probably end up with poor spending habits. This is why it’s essential to ensure that your child is familiar with the importance of saving and budgeting as well. Introducing these facets of finances makes a child well-equipped to value money better and make wiser financial moves as an adult. In other words, laying a strong financial foundation for your little ones, step-by-step, helps.
If you are worried about how to go about imparting financial literacy to your child, fret not. We have enlisted tips that will work as quick money lessons.
The most important thing you can teach your child is delayed gratification. This draws a line between the spend-now and spend-later purchases.
Lesson: Just because you want something fancy that has caught your eye, you can’t always have it whenever you please.
Don’t give in to all their demands. For example, if there’s an expensive toy that can wait, learn to say a no and ask them to wait until their birthday or any such occasion.
Following such an approach teaches your child that money shouldn’t be spent carelessly. Plus, practising self-control and giving every major purchase sufficient thought, isn’t that bad after all. For all you know, you may realise you never really needed it after all, thus, saving money.
The truth is you can’t really teach a kid about finances without money involved. Give your child a monthly allowance and emphasize the importance of saving.
Lesson: When you have X amount of money, try to set aside at least 30% as future savings and spend the rest.
Try setting a goal that you know your child would be keen on. For example, getting a driver’s license to be able to drive just like you or enrolling for an art class like his/her role model. Setting a goal he/ she really cares about will make it easier to save instead of aimlessly splurging all of the cash.
Following such an approach trains your child to always save a part of income for any financial milestone or emergency. This step is in fact what takes us to the next step which is investing.
There’s not a single kid on this planet that has been unhappy on learning that there’s an investment out there made by his/her parent. The problem is not all parents actually take the time out to show the growing corpus to their kids.
Lesson: Investing money wisely is a sure shot way to multiply it and earn more.
Take the time out to show your kid the difference in the initially deposited amount and the positive returns that the investment has generated over a span of time. For example, if you have invested in a fixed deposit or mutual funds for your kids, involve him/her when periodically assessing the returns earned.
Following such an approach teaches your child that investment is definitely a good approach when it comes to finances. Plus, whilst attempting to understand the growing returns, he/she may also pick up on quite a few financial terms along the way.
Budgeting is a core concept in financial literacy. Without a budget, there’s always room to spend more and thereby, lose more.
Lesson: Sticking to a budget helps ensure that you have enough money for important things and you won’t end up in a debt.
Since most kids are tech-savvy, this job only gets easier for you. Teach them to use a budget app and diligently track their expenses however minuscule so they are aware of their spending patterns while ensuring they don’t run out of money. You can also gift them an expense tracker diary dedicated to maintaining their budget.
Following such an approach trains your child to maintain a spending log that guides them to make better monetary decisions basis their financial situation.