4 Tips To Make Your Kids Financially Savvy
Money is an “adults only” topic in India and kids are not supposed to be worrying about it. But the times are changing. It is up to parents to teach their child financial education at an early age and then develop these skills as they go along. Here are 4 key things that parents must teach their children starting at an early age and move on progressively as they grow up.
Make them understand the power of basic budgeting
You can start this as early as the age of seven or eight years. When you send your children to the neighborhood grocer to buy things for the house, let them take responsibility for the cash they carry and bring back. This will instill financial diligence in them.
Most parents give pocket money to their children. Let them start maintaining a record of where they spent their money. At the end of each month, sit down with them and explain where they could have spent less and where they have spent more. This will underscore the importance of budgeting and analysis in children at an early age.
Open a bank account for them
It’s important for kids to see how the bank works to become financially savvy. Let them watch you make a deposit or withdrawal. Open a bank account for your child, and teach them about basic banking products. For instance, children can earn higher rates with a certificate of deposit, but they’ll need to wait a specified period before touching their money. If they want or need easier access, a savings account will provide that, but it will pay lower interest rates. A high yield savings account can strike a good balance.
Help them understand the difference between ‘need’ and ‘want’
Help your child understand that not everything he or she ‘wants’ is really a ‘need.’ For example, you can explain that food is a “need,” but candy is more of a ‘want.’ Be sure to emphasize this when your children are young, otherwise, the line between wants and needs can become blurred as they get older. Explain that acquiring ‘wants’ is fun every once in a while, but only after needs are met and there is money available for the non-essential things.
Teach your kids while it may be tempting to purchase a ‘want’ right now, it’s not always the best move. For example, is buying a cell phone with the latest technology the first day it becomes available a fiscally smart move? Probably not, because technology usually costs more when it’s new. If you’re willing to wait six months or a year before purchasing that new phone, you will save money while still getting the same technology.
Let your children make spending decisions
Say your kids receive money as a gift. Should you let them spend all of it during your next trip to the store, or should you make them save the money for a rainy day? It’s important to give your kids the power to decide what they want to buy with their money because it can help them understand the need for saving money. Your children might pick out items that are priced higher than they can afford. Instead of coming to your kids’ rescue by providing additional cash, help them understand that because they don’t have enough money, they will have to wait until they have saved up for the item they desire. Otherwise, they can choose a less expensive item within their budget.
Continue teaching your kids new and more complicated concepts as they get older. As parents it’s your job to give them roots and wings, so they can survive and thrive in the financial world.