Parents try to give their children the best and hope that they should be financially secured, not face the hardships and difficulties they had faced when they were children. The current generation kids are having a much comfortable life than earlier generations because of increased disposable household income, fewer kids per couple, and improved standard of living. Due to exposure and media influence, they are clear about their aspirations and dreams for their future. But real life is tough, and one must make his children realize that it involves much effort, hard work, sleepless nights, and stress to earn money.
As protectors, we wish our children should be more cautious and realistic while making the monetary transaction. It is not an obvious job and requires to be educated systematically by introducing the appreciation, correct practices, estimations, and use for wealth from a young age.
Children from their early age notice us purchase items and realize that we can buy things with money. But they never know how we observe various money practices like budgeting, saving, investing, planning, managing, etc.
A few crucial financial lessons and ways are mentioned below that can take our children to the right path of financial literacy and habits.
Maintain Records: The first thing to be taught from an early stage is to record all expenses without fear with any apps or diary. We can motivate them by giving them little extra or next pocket money to record and present it to you. After some days, make them detect and trace their spending.
Limiting to the Budget: Next step will be to teach budgeting by adhering to a fixed periodical pocket money /budget for a few days for young kids and a monthly allowance for older children. Once they are used to maintaining records, budgeting will be straightforward for them. Realize that they have to live within the budget for the rest of the time till the next pocket money. Ask them frequently for their daily balance without any comments or judgments. Be strict when giving their next pocket money. Ask them to inform you well in advance of any significant event and not post-event to adjust the pocket money for the same.
Inculcate Patience: Infuse patience steadily with resilience. If the child demands a toy or gift, try to postpone the purchase of the same by offering a suitable future date or paying him small amounts daily and asking him to save it to buy the toy/gift. For example, if the toy costs say Rs. 1,000, pay them Rs. 50 daily for 20 days and ask him to wait till the sufficient amount is collected.
The habit of Saving: Now teach about saving after learning recording, budgeting, and patience. Show how to cut a few spends and save more. After achieving the savings target, pay additional rewards from your end to motivate them. For example, if they manage to save 20% of their pocket money, reward them with an extra 10 or 20%. Motivate them to save larger amounts for more significant gifts or events. Say if they have saved Rs. 3,000 for something, instead of going out and spending, show them the better options for Rs. 5,000 and ask them if they would like to have that by putting your rewards too. Let them save big and then spend on toys, cycles, electronic items, or bikes, which can be great learning for your children.
Sense of Responsibility: Prominent standards can be infused among children by allotting some real duties with small jobs-buying food, caring for pets or toys, their repairs, to develop understanding. Put how much ever load they can take by extending a helping hand and not interfering even if things don’t look right, allow them to learn the consequences of not doing things as per requirement.
Future Planning: As the children grow by learning, one can involve them planning in his household expenses by asking him for his suggestions for entertainment, holidays, purchase of gadgets, outings, and value their inputs and discuss available alternative options. E.g., if they want holidays at some premium location, ask them if they are ready to forego /cut some spending and wait longer? Get them involved in monitoring important aspects like insurance, investments, and taxation and teach about them simultaneously. Make them participate in your meetings with your financial planners, bankers, auditors, tax consultants, etc. Slowly ask them to help you maintain your financial documents and records.
Lessons and habits learned at a young age will stay for a longer time. Early lessons and understanding of the importance of money, management of it, and real value of it. Delayed gratification and patience will help lay a stronger foundation for financial well-being in life that will be more important than any other college educational program.
By Team Wealth ATM
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