When was the last time you took your child to the bank and explained to them the rudiments of handling money ? What do you do when the little one asks you the difference between coins and paper money, or if she could use the ATM ? If you are the kind of parent who brushes off queries about money from your child or gives ambiguous answers to these important questions, think again. It is a good thing to engage children in simple conversation about money matters and to give them some tips and regulations which will build good money habits in the long run.
1.Teach them the basics
Five is a good age to start introducing children to the rudiments of money and finance. By this age children are aware that money can buy things, but they may not be able to identify denominations of currency notes and coins. Since children usually accompany us to the supermarket or the grocery store, it is a good opportunity to point out the difference in prices and probably introduce them to the concept of value for money. You could point out the difference using a product they like such as an overpriced toy to something that is more reasonable. Or a bar of chocolate to a pack of cereal. It sure won’t be easy to deal with the tantrums at first but this is where the following point might come in handy.
2.My Own Little Bank
I was beaming with pride as I heard the coins jingle in the piggy bank my parents gifted me a few months earlier. It wasn’t a huge amount but I was elated all the same. I was all of about five or six years old and looking back I guess it was a wise decision to introduce me to the concept of saving and wise spending. Having a piggy bank is a great way to teach children the benefits of saving on a regular basis, while giving them a fun way to do it. The idea of keeping money inside the pig until it is filled up, excites the child’s imagination. Gradually the child will pick up every coin he finds around the house and feed the pig! While feeding the pig is fun for a while, this idea helps him appreciate the value of smaller currency and how it all adds up in the end.
3.A dollar for every dime
Matching every rupee that your child saves can be a great way of motivating them to save more with a future goal in mind. Let’s say, for a new bicycle or towards his college fund. You could for instance encourage them to save more than they usually do each month and then match the amount or top it up with a generous contribution.
4.Watch what I do
One of the best things you can do is to lead by example and by this, I mean show your kid that you save money too. Drop some coins or money into a cookie or glass jar, this will show your kid that saving is a normal thing to do. As children learn by imitation, you provide a powerful visual reminder of saving money.
5.Opening a Bank account
Opening a bank account is probably suitable for older children let’s say from 8 upwards. Luckily, I went to a school where we were taught about the importance of saving as part of a practical lesson. I still remember the excitement when our class was taken on a visit to a nearby bank and opened accounts in our names. You could start off with small amounts such as ₹100 or ₹200 and keep topping up. When the child is mature enough to understand concepts such as simple interest and compound interest, you could introduce them to a high yield savings account or a similar product.
6.Play Financial Games
I am sure many of us grew up playing Monopoly, that well-loved board game which made us familiar with the world of banking. There are also other newer options such as Pay Day that make it easy to understand the complex world of finance in a fun way and lets them see where cash flows actually lead. The Finance Guru Robert Kiyosaki put together a board game called Cash Flow for Kids that introduces children to the concepts of investing, assets and liabilities.
7.Discussing Finance with the Kids
You may not want to talk to your kids about money problems or how much you earn. But you could share the plans you are making for buying a new house or car and how you intend to achieve those goals. This could be as simple as discussing these things with your spouse in the presence of the children or introducing them to your financial advisor or personal banker.
8.The Economy Matters
While emphasising the importance of money and saving is good, it makes more sense when viewed in the larger context of the economy and making buying decisions. Demand and supply are useful concepts that can be introduced to children.
Waiting to buy something you need is hard enough for an adult. It could be doubly harder for a child or a teenager. But this holds an important lesson in saving, as very often we buy things on a whim and later regret it. Parents should assist teenagers and children assess whether they really need that latest PS3 or Iphone 7S Plus or a designer dress. Since extra expenses devalue money, waiting for a while moderates the urge to buy something they might want but not necessarily need.
As parents, you so much want to protect children from making mistakes. But it might be a good idea to let your kid or teenager buy that toy or video game which you’re sure he won’t play with for more than a few days. It just might teach them a proper lesson. At a certain point, they will realise they haven’t made the best use of their money and will think twice before shelling out money for anything.
Teaching children to be responsible and clever with money is a lesson that will have life-long benefits. While you tell them about financial matters, also emphasise that while money can buy gifts for loved ones, it is equally important to show love through your actions as well.