The money habits we see in adults often get inculcated in the early years of life. These habits are usually picked up from parents and surroundings. Typically, a child who grows up in a financially disciplined environment tends to manage his finances in a more systematic manner than his peers, studies reveal.
While you might associate financial learnings with investment strategies to pin the stock market, it could begin from as basic a concept as saving and spending, which can be easily understood by children.
It’s important to train kids at an early age and here are a few things you must start with.
Instead of subjecting your kids to the routine lecture on the ‘value of money’, introduce them to the concept of saving. Make them put aside a certain amount every month to accumulate enough over a period of time to buy toys or something they wish to acquire. This would not just teach them how to save but also help them to be patient in the process. Once they are given the responsibility to manage their pocket money, they would eventually learn how much to save and how to spend. This learning would come handy in managing monthly budget once they grow up.
Concept Of Necessity And Luxury
We are living in an age of plastic money, wherein it’s convenient to buy first and pay later. The temptation to splurge on today’s ‘wants’ is much more than that of saving up for tomorrow’s ‘needs’. Spending according to your goals requires a lot of planning and discipline and they show up best if learned as a child. You can teach your kids to hold on to their money by setting goals for them and giving them a timeline for meeting those goals. For example, you can ask them to save for a couple weeks to buy story books and save for a few months to buy a PlayStation.
When you chalk out a budget for the month, just read it aloud to your kids and explain why you prioritised certain items over the other. Once they have learned the basics of saving and spending, you can give them the task of setting their own budget. This would help them understand that there is a limited inflow of money and that all their needs and wants would have to be fitted in with what’s there. This would sharpen their math skills and develop an understanding of when to splurge and when to save.
Necessity Of Hard Work
You must let your children know that money doesn’t come easy and it requires hard work. An ideal way to instill the importance of money in kids is by starting a reward programme for them. On completion of a task such as making their own bed or packing a lunch box, you can give them a cash reward. The money they earn can then be used to buy something they want. This would help them to establish a link between reward and work, and motivate them to make the effort.
With these basics inculcated at an early age, managing personal finance would come easy in adult life.