Financial Planning,Plan

From Budgeting And Saving To Spending, 9 Money Lessons Parents Should Teach To Their Children

Lessons about managing finances may seem boring for kids, but parents should be able to explain why these teachings are vital for survival in life.

Outlook Money

Updated on: 29 August 2024 10:17 pm

Legacy Photo: Legacy

Teaching children about money management can be one of the best gifts from parents. If you instil in them the judicious use of money, discipline and other vital financial lessons early on in their lives, it will go a long way in building a financially secure future for your children. Financial literacy will empower and serve them to be successful throughout their lifetime. Here are some tips you can share with your kids to help them attain financial literacy:

Start Early

From a tender age, the child can learn ways of saving, spending, and earning. Using piggy banks, playing games like Monopoly, Business, etc., and simple lessons about money, like how it is used to buy things or is earned, will make them appreciate the value of money. For instance, in the US, parents allowing children to manage lemonade stalls during vacations is a popular and fun way to teach children about money management.

Set a Good Example

Children learn from what they see. Incorporate good financial behavior in yourself. Let them know how you budget, save, and make conscious decisions about your spending. Explain your financial decisions in a way that will make sense to them and tell them why you made them.

Give an Allowance

Giving an allowance is another practical method of teaching children to handle money. Parents can determine a reasonable amount based on their children’s age to see how they negotiate, save, spend, and share money. Let them freely apportion their allowance for saving, spending, etc. One such example is of 8-year-old Rishi, who manages the pocket money he receives from his parents: He says, “Right now, I’m saving half of my pocket money for a new Lego set, and the rest I’ve used to buy treats”. Also Read: What Are The Types Of Annuity Deposit Schemes And How Do They Work?

Teach the Value of Saving

Introduce your kids to saving through setting goals. Let your child identify something they want to save for, such as a toy or a game. Then, have them deposit the money into a jar or a piggy bank where they can watch it grow over time. Seeing the amount grow over time will encourage them to learn about the value of time, patience and money.

Involve Them in Budgeting

The best way to train your children is to engage them in activities like budgeting. For instance, show them how to budget for groceries, family outings, and vacations. Help them make a simple budget of their own money to apportion between different things. This step will help them appreciate planning and decision-making about spending. Moumita Dutta, a homemaker and a mother of two from Kolkata, states, “I have always involved my children whenever I’m making our monthly family budget. My daughter, Pratyusha, now living alone in a new city, says that this habit has helped her plan her monthly budget on her own.”

Discuss Needs vs. Wants

Teach your kids to distinguish between needs and wants. Needs are the necessary things like shelter, food, clothes, etc. On the other hand, wants are those like toys, entertainment, etc.

Introduce Banking Basics

As your children grow, explain basic banking services to them. Open a savings account in their name and teach them how to operate it, how to read bank statements, and what interest rate means. Explain to them how banks work and the advantages of saving. When they are ready, explain the concepts of credit and debit with real-life experiences.

Incorporate Technology

Employ technology to teach money management habits. There are applications, such as Famzoo, Xare, Fampay, etc., and online tools that will enable them to keep track of their savings, set goals, and learn about money through various interactive games.

Teach Them the Importance of Giving

It is also vital to teach children about sharing and helping others. Encourage them to donate a part of their money to organisations for social causes they love; this will help them become empathetic to others, knowing how their contribution has made a difference in their lives. Money management is a continuous learning process for children. An early start will help them gain practical experience in handling money, knowledge, and skills and equip them for the future. Lessons they learn at a young age will form a strong base for their future financial security.

Published At: 29 August 2024 10:17 pm