Money Matters: Teaching Kids About Finances

It's better to start early.
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Isn’t it ironic how we start thinking more about savings and investments after we procreate even as we spend more on diapers, toys, stationery, and what not?  

Festival season is upon us, and no matter how much we try, we end up buying unnecessary gifts for our children, and they end up getting money from their grandparents and elders. This serves as a good time, rather, to educate your kids about money, and curb their spending habits. 

Teaching your kid/s the value of money is important but how do you begin? 

Talk about money 

The first step is to introduce the concept of money to your kids. They should be aware of the currency, and the function it plays in our lives. Make it exciting for your child, show them videos or get books that talk about finance, show them different currencies, your debit card, etc.  

Take them shopping, and let them watch how you manage your money. Sit next to them when you are budgeting for household expenses. The more open you are about your finances, the more aware the child will be about money matters.  

Take your child to the bank or ATM, and explain how it functions. Talk about their fees, investments, etc in front of your child regularly. Of course, sensitive matters need not be discussed in front of them.   

Start early, start slow 

To teach your kid/s about the concept of saving and spending, get a piggy bank for your child. Each time they get money from a relative, ask them to keep it in their piggy bank.  

If your kid is older than four years, start assigning money to the chores completed. While they cannot accomplish big tasks, you can tell them that helping a parent in sorting our laundry or cleaning up after playing with toys will be rewarded with money.

Let them count the money you give them, even if s/he is younger than four. Not only will they get in the habit of doing chores around the house, but also feel good about getting money in exchange for the work they do, just like their parents. 

You can also open a bank account for your child, and each time their piggy bank fills up, take the money out, and deposit it in their account.  

Teaching through games 

Money games like Monopoly, The Game of Life, Pay Day, etc are absolutely fantastic when it comes to educating your child about money management. You can ask your younger child to help you count coins and rupees as a game. It will also help them in grasping concepts like addition and subtraction. 

Let them handle their piggy banks 

Next time your child asks for a toy or a gadget, ask her/him to check their piggy bank or bank account. But you also need to put a cap on how much they can spend in a given month.  

While older children would easily agree to part with their money to give in to their whims, younger ones might not relate easily to the concept. Tell them that you will help them attain the target and pay half or one-third towards buying a certain toy.  

Explain the difference between want and needs 

It’s near impossible for a kid to never want toys, chocolates or gadgets. You, as a parent, however, have the responsibility to explain the difference between wants and needs to your child. Every want cannot and need not be fulfilled, even if they have the money. But needs are non-negotiable.  

Spending Plans 

While saving is important, tracking the expenditure is equally important. Ask your child to draw up how much s/he would want to spend in the coming month, and how many chores would they need to accomplish to reach that goal.  

You can ask your older kid/s to find and plug gaps in household expenditures as well. Not only will it make them responsible, but it will also help them curb their urge to spend. 

Investing and compounding 

Compounding is a great tool to multiply your money over a period of time. Explain this concept to your child when they are old enough to grasp this concept, and help them invest.  

Of course, since they are still learning, your little one might make mistakes. Keep room for error, and treat each mistake as an opportunity for them to learn.  

Ananya is a Delhi-based working mother to a seven-year-old. 

Read more: 10 Quotes That Inspire The Good And Happy In Life

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