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Child Plans

Post By Mariya Panwala

Here’s How to Make Your Child Money-Smart

Most schools will not teach your children money lessons; they will either learn it from their friends or from the culture they’re growing in. And as parents, you wouldn’t want to fling your children in the ocean and hope they will figure out how to swim. For all you know, they might just drown!

Responsible parents take it upon themselves when it comes to teaching their children money lessons. But most parents who wish to educate their children financially have one nagging question: When and how do we start teaching our children money lessons?

“By age 3,” observes Beth Kobliner, the author of Make Your Kid a Money Genius. “By 3, children can understand basic money concepts like exchange (sic), that they have to make choices, and that things have value.” She insists that it is between the ages of 3 and 7 that parents should start talking about money to their kids.

After answering the “when” part of the question, let’s move ahead with the “how” part.

Teach Them the Importance of Savings

Do this activity: give your child a few currency notes and two jars. Label one of them as “Save” and the other as “Spend”. Now, explain to your child the meaning of both these words. Then ask him/her to put in the currency notes in any of the jars s/he wishes to. Observe what your child does. After a choice has been made, ask your child why s/he chose a particular option. If the child hasn’t chosen the “Save” option, explain to them why saving is important.

Post this activity, give your child a piggy bank and ask him/her to regularly put into it all the money that s/he will receive in the future from you or your relatives. And when they hit a savings goal, give them a reward. This will encourage them to save more.

Don’t Give in to Every Demand

When your child asks you to buy them XYZ, don’t easily give in to that. Also, avoid saying a plain “No”. This could disappoint them. Instead, take this as the opportunity to further inculcate the savings habit in them. Ask them to put it on their wish-list and encourage them to start saving for it.

Involve Them in the Preparation of Your Household Budget

By the time your child is over 7 years, you can start involving them in the preparation of the household budget. For starters, prepare a budget and take your child grocery shopping. And while you’re at it, ask them to keep a tab on the set budget and see to it that they’re not buying unnecessary items. This will help them understand how to set priorities and avoid unnecessary expenditure.

After they have crossed 10 years of age, you may start involving them in the money decisions that you and your spouse would make. Explain to them why you took a certain money decision. For example, if you’re going on a budget family trip, explaining to your child why you’re choosing to travel by train instead of the airplane will not only help your child become more aware financially, but will also help them understand the value of money.

Give Them Commissions

In their teenage years, children tend to develop goals to buy something substantial for themselves – a mobile phone or a PlayStation. In order to help them achieve this goal, you can start giving them pocket money or commission every time they undertake a major household task, such as paying the electricity bill or washing clothes.

Introduce Them to Insurance

Right when your child is young, introduce them to the concept of insurance. Tell them why you took a certain insurance policy and how it is going to help them when the time comes. Explain to them how, for example, having a health insurance policy will relieve you from an unanticipated financial burden that a hospitalisation event may create. Gradually, introduce them to different types of insurance policies so that by the time they’re in their 20s, they have become insurance-smart.

Finally, Be a Positive Role Model

The general belief is that the child’s conduct reflects the ways of his/her parents. Unless you yourself do not practice what you preach, you can’t expect your child to do an amazing job of saving. Even if you might have made money mistakes in the past, it is alright as long as you have learned from them. Be sure to avoid them in the future.

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References:

PBS NewsHour. (2017, March 30). The Best Ways to Teach Your Little Kids About Money (Video file). Retrieved from https://www.youtube.com/watch?v=bmyzRf3bV3k