When children are between five and seven years of age, they should be introduced to basic topics related to finance.
At eight, give her/him some money and explain its value and usefulness.
At 12, open a bank account for your child to foster in them the sense of financial responsibility, says Deepak Bajaj, author, business coach and motivational speaker.
- How to save and invest money for your child’s future? Ask rediffGURUS HERE.
Financial responsibility is an important life skill that parents can teach their children when they are young.
In today’s complex financial times, money management is a lesson that forms the basis for future financial decisions.
Here are five simple and effective tips that will instil financial responsibility and awareness in your children.
1. The right perspective about money
When children are between five and seven years of age, they should be introduced to basic topics related to finance.
You can tell them that, while money has a special importance in life, it is not life.
While earning money is very important, it is also your responsibility to tell your children under what conditions and to what extent it should be earned — for example, how to maintain a balance between greed, need, requirement and desires.
When children understand this early on, their perspective changes completely.
Similarly, it is not necessary that every person who has a lot of money also has culture, happiness, health and life values. Therefore, it is very important to always tell children that money has a certain place in one’s life and it should remain there only.
You can explain concepts like saving, spending and earning in very simple language by drawing examples from real life.
Always make children realise that money is earned by working for it and is used to buy necessary things.
2. Teach saving by giving an allowance
When your child is between eight and 10 years old, give her/him some money and explain its value and usefulness.
This way, you can teach them the spirit of saving first, then spending it and finally sharing with others.
3. Teach from real experiences
We all know that children learn faster and better through experience.
It is good to involve children in the family’s important financial decisions so that they get firsthand practical knowledge.
It’s also a good idea to take children along whenever you go out shopping. Teach them to compare prices and shop within their limited budget.
While doing this, you should always emphasise that they need to prioritise their needs over their desires.
Similarly, when you plan for any big expense, make your children a part of the budget planning. Make them realise how to stay within the budget, how you are trying to save, etc, before making any big expenditure.
Learning how to manage money in such cases increases their confidence.
Children will not only know how to design a budget, they will also able to make a balanced budget for themselves in the future.
4. Open a bank account for your child
You have to do this when your children are between 10 and 12 years old.
When you start a bank account for your children, it automatically creates financial responsibility for them.
Whenever you go to the bank, take your children with you and try to explain to them about deposit, withdrawal, interest and the types of loan.
When children spend something, or you make them spend something from their account, show them their account statement issued by the bank. Along with this, show them the savings they have made so that they can understand the format of spending and saving.
While improving the psychology of children, understand that by having their own bank account, children feel responsible for money. They will gradually get familiar with the banking system on their own and this habit will save them from financial crises in the future.
5. Set good examples
Always remember that children usually learn from their parents.
Therefore, as parents, you will have to set ideal financial habits in front of them — such as always being transparent in front of children about the family’s financial matters, openly discussing financial challenges in front of children and involving children in the making the household budget.
Teach children how to save and how to make independent financial decisions.
Explain to them the importance of spending within limited means, avoiding debt and always taking financial decisions thoughtfully.
When family members prioritise saving and spend wisely, it has a very strong impact on the psychology of children.
You can also involve children in activities like donating or raising funds for a cause. This helps them develop a sense of sharing and helping others.
Creating financial awareness in your children is like a journey that gradually reaches its destination. As a parent, you will need patience and consistency.
As your children cross the age milestones, you should keep guiding them in financial matters. Discuss this topic openly with them and keep teaching them financial literacy.
- How to save and invest money for your child’s future? Ask rediffGURUS HERE.
