Lot of parents ask me how to teach children about money management. In present time kids want to have every new product they see in the market or with their friends. Thanks to advertising world, which do not leave any stone unturned to lure them with attractive and licking offers.
Very they easily understand that dad we are getting 2 free on 1. But do not understand that we have to still pay for 1 which might equal to cost of 3.
As a parent we have a lot of responsibility towards our kids for teaching them good habits to be a better person and a better citizen. Which includes habits like - table manners, giving respect to others, sportsmen spirit, being cooperative, not to use abusive language, help elders etc. But many a times we forget to teach the manner of money management which is in no way of lesser importance to shape up their life.
Most surprisingly, none of the school teaches the biggest subject in life i.e how to manage money. There has to be a subject of money management in every class. So that they can inculcate it since their childhood and avoid making mistakes in future like most of the investor does.
I am putting some points which can help parents to make children learn the value of money and its management:
1) How to start - Big Question WHEN and HOW ?? We should start talking to them as soon as they start saying "I want this". At every age take opportunity to make them understand how you manage money. Model how you make money decisions while shopping, paying bills, going to bank, avoiding or delaying unnecessary expenses.
2) Many Parents might feel that when I myself is not good at money management , how can I teach kids for the same : Whether you teach them or not they see how you handle the money. To quote James Baldwin:
"Children have never been very good at listening to their elders, but they have never failed to imitate them"
Unquote.You are a role model but you are not required to be perfect. Try to demonstrate the best use of money in front of your children and try to make them as positive as you can. Do not forget to discuss the mistakes you did with money and repercussion of the same. Share with them your emotions and value of money.
To illustrate: My son wanted to have an PSP on his 12th birthday. I made him understand that if you wish I can get you a PSP, but you will play with it for hardly a year or two. Our priority right now is to accumulate bigger amount for your future or we might need to buy a computer which would be more useful through out your carrier, which would not be possible if we will not cut down on such higher avoidable exps.
I know every time this is not going to work, let them have some of such stuff (If you can afford) as they should not be left behind in this fast growing technological world. Make them understand difference between necessity and pleasure.
Do not forget to appreciate them if they agree and never scold if disagree.Make them understand that we do not spend everything we earn but save something for future and present improved life style is result of that.You can take real life examples within your circle or relative who has faced a sudden financial crunch because of not managing their finances well.
3) Try to make mission statement by involving the family: The best way of money conservation is get your family along with you for writing a financial mission, outlining your families values and priorities. Invite your kids to brain storm answers to questions like: What is important for our family? What do you think our goals should be? What can each of us do to get the money we need for our goals? What should we do with our savings? & lastly Most important - how we can help the society?
4) Pocket Money: Give them pocket money. Try to match it with the expenses you expect your children to spend, so that they can learn that they can't spend unlimited. Ensure you do not allocate any additional amount for pocket money and let them learn how to manage within available resources.
5) Set saving goals : If you child wish to buy a costly game or gadget, let him accumulate the money for it on monthly basis in this way he will learn value of every penny saved and will be more happy when he will buy it with his own saved money. It would also ensure that he will take proper care of the it as he has worked hard for it.
6) Place to save: Provide them a place to save whether it is piggy bank, wallet, envelope or in closet.
7) A special piggy bank to share: Teach them to save something out of total saving for sharing,charity or special cause like paying for stationery exps of your housemaid etc.
8) Let them make choices: Allow them to make choices what they wish to buy. Do discuss with them what they might loose (Positives and Negatives) if they buy it. It will help them to understand difference between wants and need.
9) Reward them: Whenever you feel that they are asking for food or drinks which are not good for him. Give them option of either go for it or have an additional contribution to piggy bank to have corpus to buy the gadget earlier.
10) Take help of Certified Financial Planner : Long term investments are best to reach you goals easily, take help of a financial planner to make them understand meaning of the same. Financial planning is a process of wisely managing your finances so that you can achieve your dreams and goals - while at the same time helping you cope up with adverse situation which comes in every ones life. Managing finances is ultimately your responsibility, but you can take help of a financial planner. A qualified financial planner can help you to take decisions that make the most of your financial resources.
