Our children today are fast learners, sharp, tech-savvy and observant. They pick up habits even faster than we can imagine.
They develop a sense of needs, wants and lifestyle at a young age. What they forget is saving and investing money is vital for a secure and happy future.
Some do realize the importance of investing don’t really know how to or where to invest. They then seek personal finance advice or go wrong with their investments.
Financial literacy is not only about having the knowledge of basic financial terms, but also about having the skills required to develop a financial acumen.
As a parent, it is your responsibility to build a strong financial competence in your children.
Most importantly, you do not have to be wolf of Wall Street to teach your children about basic finance. All you have to do is build a strong foundation by giving them a perspective and build habits.
In this article, we shall cover the basics of financial literacy which you could use to educate to children in this regard.
These simple yet effective activities could help your child understand the basics of finance. This knowledge would go a long way helping them throughout their lives.
In this article
1. Give Monthly Allowance
Calculate and set up a monthly allowance for your children.
Let them juggle with it.
It will be their personal money that they spend. Let them decide what to buy and how much to spend from it.
Increase the allowance reasonably from time to time. Remember to give them extra in terms of rewards and recognition and maybe a yearly bonus attached to festivals such as Diwali can also be considered.
Tell them that this is how corporate work as well!
2.Have Review Sessions
Ask your children to write down everything that they spent, by making a daily diary. Tell them that it doesn’t matter where they spend. They must note it and balance it at the end.
Discuss and review the expenses at the end of each week. Tell your children how one high expenditure can impact your monthly budget.
If your child is too young, then sit down with him/her and help them do this. Explain the math that goes behind it.
Remember to inspire your kids to do this consistently by doing the same with your finances.
3.Set Goals and Save
Firstly and most importantly discuss wants vs needs with your children. Tell them that they need to save to buy that expensive toy.
Tell them about how we save money right now to buy things we desire, later. Ask your children to set aside these desires in terms of saving goals.
Tell them to give you the amount they decide to save and you shall keep it safe for them.
Let them know that you saved to buy the car. Children observe parents very closely and therefore the behavior of parents tends to be the biggest source of learning for them.
4. Get Your Kids Involved
For true financial understanding, you need to get your kids involved. Tell them about, how you set your monthly budgets and keep aside savings to run the household.
Instead of numbers, you can talk in percentages, if you are not very comfortable sharing the information.
5.The Real World
You need to tell your children about how money works in the real world. Teach them about living within one’s means and chewing only as much as one can bite. Remind them that the budget helps you do that.
Take your kids out to the market and discuss about various occupations. Tell them about wage rates and how the pay is attached to various occupations.
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Most importantly, the more active a learning experience is, the greater the learning gains and retention.
How does this work with really small kids? Start by teaching them the difference between the different kinds of denominations.
You can ask them to differentiate between the various notes and give you the change for two thousand rupees in various denominations.
6. Grocery Shopping Turns Classroom
Make taking your children for grocery shopping a habit. This healthy habit is not only fun but also very beneficial in the long run. Before going for shopping, make a list.
This prevents you from overspending and even missing out on the essentials. Ask your children to make their list too. At the market, introduce them to the rates of various items.
Also, introduce your kids to the various measuring scales and units. Throw them math problems by asking them to calculate the price of 250 grams of an item. Ask them to do the totals. Make this a regular practice.
7. Lessons At The Mall
Do not give in to your kids’ whims and wishes at the mall. Talk through purchases with your kids and help them weigh all factors that go into a purchase decision.
Remember the grocery store lessons at the shopping mall too. Do not indulge in immediate gratification. Wait for the sale, search for discounts, save for items and pay with cash instead of credit. Teach your children how to swipe the cards and hide the pin.
Ask your kids to compare two items keeping in mind that money is finite. A method to keep in mind is to read the store’s price labels, look at the size and price, and compare the bulk amount percent. You must remember not to hoard and waste just to get the extra discount.
8. Get Your Kids To Open A Bank Account
Many a bank have the option for a child-friendly, zero minimum balance account. Enroll your kids for one and help them see their money grow over time.
Tell them about how a bank works. Discuss with the concept of interest and how the banks pay us back for saving money.
9. Be the Bank for Them
Introduce your child to the concept of money can help you earn more money. Give them an incentive to take only 90% of their allowance only to earn an extra 10% the next week.
This will teach them the virtue of patience. It will also make them learn how to plan expenses and income and put money to the best of use.
10. Play Games that Involve Strategy
Try to make learning fun. Introduce concept and life lessons, including financial literacy, through and with the help of board games.
Board games like Monopoly, Game of Life, Business, Payday, and stock exchange impart a variety of tips on money management, financial planning, negotiation, and career planning.
These games can be an effective way to teach concepts like using the money for emergencies rather than hoarding, saving and investing in stocks, real estate, and banks, and using money sensibly.
Strategy board games such as Settlers Of Catan, Splendor, Cacao teach skills for investing.
Disclaimer: The views expressed here are of the author and do not reflect those of Groww.