I have been watching my child’s activities since he was two. Most of the time, he would copy me. When I talk on phone he also puts the mobile on his ears. Similarly when I buy something he likes to pay the shopkeeper, since he has seen me doing the same. A little grown up, now he knows what an ATM (money dispensing machine) is and considers every visit an adventure. I am sure, very soon he will be aware of banking activities.
Although, these activities are fun for children, they can be a good source for teaching them about money. Piggy banks have been there since I was a child. Probably the absence of something like an ATM and not so complex financial markets didn’t give enough reason to inculcate the learnings. However, with change in scenario the money management skills need has aroused. Although teens is the age when the child learns about creating a budget etc., there are numerous ways through which children can be taught about the importance of money from a very young age. These learnings can go a long way in changing the personal finance behavior of your children and when they grow up they have a higher probability of making prudent decisions.
- Set examples: Children from a very young age have the habit of copying the activities of others, especially their parents. Take this opportunity to teach your kids. Take them to vegetable stores, banks, etc. where the kid will learn what is done with the money. Make the child make and receive payments with their own hands. This helps in generating interest and the child slowly learns how money can be used.
- A piggy bank: This is one of the favorites among children and the easiest way to teach kids about saving money. Give some money regularly to the child to deposit in the piggy bank. In India, we have so many traditions of giving blessings to the child in form of money, especially by grandparents. Make sure these go in the piggy bank. This form of education helps in teaching the child why money is being accumulated.
- Monitor pocket money: All parents give their children pocket money when they start going to school. Monitor it closely to make sure the child is not getting into bad habits. Teach the child to deposit part of the money to buy something that they want.
- Set goals for the child: Set some goals for your child like buying a toy or bicycle on their birthday and teach the child to save money for the goal. Piggy bank savings if utilized for the goal, instill a lesson that savings lead to great rewards.
- Earn while you learn: You can learn when you are earning. In other words, money is not available free but you need to earn it by doing some work. This mantra has been used by many companies to instill the required knowledge in their employees, especially freshers. You can teach your child this lesson easily by giving some household work and paying for it, once it is done.
- Shop around with your child: Supermarkets or your favorite ‘kirana’ stores are a great learning source for your children. Prepare a list of requirements along with him/her. Then visit the supermarket or store and buy the items. The child in the process learns how to shop and what is the use of money.
- Savings: A very important element of personal finance which starts even with a two-year old child in the form of piggy bank account. Teach your kids how to save money. As they grow older, teach them the importance of savings. Involving your child in household bills is a good learning to teach them how money is used and what things are bought. Through this they will learn the amount of saving one should do in order to purchase such items.
- Investments: Involve your kid in your investment decisions and make them learn the importance of investment. If following a financial plan, involve them during the review or when making the investment decisions. This will help them by creating awareness and they will be able to take prudent decisions, when they start earning.
- Create new ideas: Learn new ways to teach your child the importance of money. I have seen some parents creating simple games related with personal finance and playing them with their children to teach them about savings and accumulation. As children, they follow your footsteps and hence the responsibility of inculcating appropriate personal finance behavior, rests on you.
In today’s scenario when financial situations can lead to various imbalances in life, it is necessary that the child’s upbringing is done in the right manner. Without it, children even commit crimes to fulfill their needs, for a higher lifestyle. There is no age to start teaching your child. At times, you can even involve a financial planner who can help your child to grow with the financial literacy required for prudent decision making.