4 ways to raise more financially disciplined children
While we may see money as a strictly ‘adults only’ subject in India and kids are usually not taught to bother themselves about it. But the times are changing. It is up to parents to teach their children to be more financially informed and responsible right from their formative years. This ensures that long-term financial discipline becomes a part of their inherent personality. Here are 4 key ways in which parents can progressively imbue financial awareness and diligence in their children.
Introduce them to basic budgeting
Familiarizing them with the power of basic budgeting in managing finances effectively is a practice that you should begin early with your parents. If they receive a weekly or monthly allowance from you, ensure that they are put in the habit of documenting their spending. Teach them to be judicious with their expenses, and explain to them the ways in which they could have spent less. Emphasize the need for them to analyze their spending habits and take useful lessons from the money mistakes they make in their day to day.
Familiarize them with the concept of saving
When you are able to comprehend the importance of savings, it paves the way for you to develop this healthy practice into a habit. Consider buying your children a piggy bank and encourage them to set a personal budget plan. You may also incentivize them for being able to reach their savings goal. While in the beginning, it will help generate more interest among them in being able to accomplish this feat, over the long term, it will create a saving-oriented mindset in your children.
You can also advise them to use their own savings to buy some of the simple things they want. When they are using their own savings, chances are they will think twice before blowing it off on short-lived indulgences.
Help them understand traditional finance
When your kid reaches an appropriate age, you should consider acquainting them with traditional financial institutions and practices. This goes beyond saving the money they have and into the realms of banking and investment. According to the RBI, a minor above ten years is allowed to operate a fully functional savings bank account without anyone’s help. This includes everything around personal finance, including handling their deposits and withdrawals, accompanied by you, and making sense of the entries in a passbook regularly.
It’s one of the best ways to help them analyze their spending. You may also try to merge practical lessons like purchasing power, compounding, and inflation. When they are ready, these learnings will also make them more at ease with concepts like investing, and basic investment products, including fixed deposits, mutual funds, and real estate, among others.
Involve them in your spending decisions
Once your kid has been familiarized with these basic concepts, you can think about slowly easing them into the more practical, day-to-day aspects. Think of fun pop quizzes with your children. For example, when mulling over a serious financial decision, include them in the same. Share the details of the scenario with them and ask them what they think would be the best way to go in the given situation. Their responses will help you understand how effectively you have been able to teach them the basics. If they are making mistakes, it will also do you good to let them know while helping them arrive at the right decision.