Making kids understand the importance of money at an early age, to help them grow up as a wise and smart financial planner in future, is one of the main responsibilities of parents. However, the situation in most of the cases is completely different. Unfortunately, parents find it more comfortable to discuss smoking or bullying with kids than family budgeting or financial planning. Unless you talk about monetary things with your kids, he/she will not be able to understand the importance of it. It is never too early to have talks with your children about money and financial budgeting. As per modern sociologists, the age between 7 to 14 is the appropriate time to start teaching kids some important monetary lessons.
Let’s have a look about 5 most important monetary things for your young children.
1. Saving is the key
Your daughter wants a new doll but doesn't have enough money for it? Tell her saving is the key! At the age of 7 or 8 years children usually develop a fair understanding of several monetary aspects, therefore, it is the right time to teach them the importance of saving. If they are exposed to the ideas of money management and saving at an early age, it will help them manage serious financial things like personal loan, health insurance, credits cards, etc. in a better way.
What parents can do?
There are a couple of banks or financial organisations, which allow kids above 6 years to open a saving account. Open kids saving account and encourage him/her to deposit money regularly by telling how banks pay back for saving money.
You can also encourage your kid to save coins in a jar throughout the month, to share the cost of something which he/she dearly wants. While buying the desired thing with the saved money, allow him/her to pay to the counter herself. In this way, your kid will understand the value of saving. Moreover, the nice feeling of working hard towards a goal and getting rewarded at the end is something that he or she will always keep in mind.
If your kids express desire for something expensive like a bike or video game, don’t miss the chance to discuss the benefits of saving for a bigger purchase. Learning about saving for bigger purchase will help them in future and they will be able to manage credits such as home loans or car loans in a better way.
2. Budgeting of pocket money
By the age of 9 or 10, kids usually develop the maturity to make saving and spending choices based on their requirements. If your kid spends the entire pocket money to buy a video game, and lacks money to buy a new toy car he/she really desires, try to make him/her understand the consequences of overspending.
Getting this kind of first-hand and real life experience of being frugal, will help him to plan out financial budgeting more efficiently in future.
What can parents do?
Before helping the kid to set a budget, make him/her understand the thin difference between desires and needs. Ask the kid understand what are the things he/she really needs this month and what can wait till the next pocket money comes.
If he/she wants to buy something really costly, ask him to keep a certain amount of money aside every month for that purpose. This will give him/her real-life idea about budgeting and in future he/she will be able to plan monthly or yearly budgets in a more efficient way.
Moreover, if he or she wants some loan, agree on that with a promise that it must be paid back within a given time limit. Apart from shaping up his financial budgeting skill, this will help him to manage financial matters like car insurance, life insurance and various types of loans in quite hassle free manner, more detail about it is listed bankbazaar
3. Spend wisely and smartly
Growing up as a smart spender, learning the habit of utilising the allowances in a wise way since childhood is very important. If your kid inculcates these habits right from his/her early years, he/she can utilise these in a better way in the future. If he/she wants to buy a motor control airplane whose price could possibly decrease during the winter holiday sale, inform him/her about the price drop and the money he/she could save from this smart move of buying.
What can parents do?
Ask them to create a budget, compare prices online or across different shops, and look for sales to buy their desired items. You can also encourage them to buy cheaper generic products over branded items to save some extra bucks.
In order to help him spend money wisely, ask him to keep a record of his expenditure so that he can evaluate and change anything about his spending habits.
4. Work lead to rewards
By the age of 7 kids should know that money doesn’t come from trees and they actually have to work hard to earn it. While kids between the ages of 7-10 years get some pocket money or gifts by helping parents in small household chores, like changing bed sheets, taking out the trash, etc, teenagers can earn money by mowing the grass, cleaning the floor, babysitting, etc.
What can parents do?
Parents should not give allowances to kids for doing nothing; make them work to earn the allowance or reward. Be strict, if they are reluctant to do work, stop giving pocket money. Understanding the need to work hard with dedication is something which is very important for the kids.
To make them realise the value of money from a young age is crucial to help them taking wise financial decisions like car insurance, personal loans, and investments, etc in future.
5. Don’t just save, share it also
This is the age when your kids should learn the importance of sharing. Not only do you need to make them realise the value of sharing their things with others, they should also be taught to share money with needy people. If your kid gets pocket money, he/she should know that a certain portion of the money would go to charity. It will help him/her to evolve as a wise human being as he/she will understand that money is not just used to buy things, it can be used to help poor people.
What can parents do?
Sharing is a habit which your kids learn from you. So, from the very early age inculcate the habit of sharing by making small gestures. Whatever initiatives you will take will affect your kids in a positive way.
Apart from that, when your kid is very young you can simply ask him/her to give up old toy or dress to others and when he/she gets older encourage him/her to donate something on a regular basis.
Teaching kids about important monetary lessons, from saving, budgeting to planning expenses, can help them become successful, financially stable adults in the coming future when they will grow up. These money management skills will help kids to grow up as smart spenders who can take care of every financial aspect starting from four-wheeler loan to medical insurance wisely.