If you are thinking that it is too early to introduce the concept of how to become financially responsible to your kids than you are wrong. When it comes to familiarizing any new concept whether it is about taking up the small-small responsibilities, making healthy food choices, developing a reading habit or money management for kids it’s too early. In fact the earlier it is, the better it works.
Raising financially responsible children can have their own benefits. Your child starts learning about the importance of savings, investing money, shopping, and expenditures etc. from a very young age. Raising children with such knowledge can not only bring awareness towards money and its value but also boosts their confidence.
Teaching kids to save money:
When your child questions about the bills you always answer it in a non-emotional way. Obviously, you don’t want your kid to get stressed out about money, bills, earnings, and expenditures. But it is important to teach kids about how it should be managed.
You can explain this concept in a very basic manner by saying:
- We pay our bills first i.e. electricity bills, water bills, installments, telephone bills etc.
- Then buy you the groceries
- And then you use what is left after leaving a certain amount as your savings
Amazing ways to teach a child to be financially responsible:
1. Lead by example:
Good parenting is how we behave, we talk and we influence our kids. The very same concept works here. Your child is highly influenced by you therefore; teaching kids about finance by limiting your shopping trips as well as other expenditure can help. For e.g. using coupons or voucher codes when you are shopping groceries. Showcasing how much it is important to spend wisely. Explain to your child that because you saved today, you will able to spend on another important purchase or can make a big purchase in the future.
2. Teach saving, giving and spending wisely:
It is important you start educating your child about money management from an early age that you don’t have to spend all whatever you are earning. You can make them understand by using crystal/glass jars each labeling with “spending”, “donating” and “saving”. There are plenty of ways for kids to make money for e.g. they can participate in some community services, do various chores for you, clean the backyard, wash the cars, walk the pet, sell crafts, work as mommy’s helper etc. Inspire him/her to divide the cash into these 3 jars and that is how the kids learn money management.
3. Take it to the bank:
Nowadays banks allow minors to open a savings account with a minimum balance amount. Opening a savings account or a recurring account for your kid will teach him/her about the banking process, how to utilize savings and with the age-appropriate concept you can teach how the money can earn interest which eventually leads to huge earnings for the future.
4. Teach kids to track their expenses:
It is important that you make your child understand to track their expenditure. Letting them know will bring awareness in them about their spending in case if they are spending more than they are supposed to save. Financial literacy for kids is important, hence educated them about their financial condition and pinpoint the overspending and show them the ways, and the tips on how they can curb their spending.
5. Share your values:
Let your child know the value of money. Teach them where to spend and how to spend wisely on something long term and meaningful for e.g. something like investing in career fees, or something substantial like fixed deposits etc. One of the good parenting tips is to let your child know how to use money responsibly.
6. Let them make mistakes:
Do you give your kid some allowance and let them earn money doing some household chores for you? Giving a small amount of money will give them an opportunity to manage their money. If at some point in time, they make a mistake making a wrong choice, let them handle its negative consequences. This will teach them to make smarter financial decisions in the future.
7. Teach to compromise:
If your kid wants something, he/she must forego something else. This is how the real world works for every single day.
It doesn’t matter what exactly is given up, particularly at very young ages. What matters the most is that your child understands this rule. What is important here to learn is to let your child know that there is a cost for everything, and that if they want something, they have to determine its priority and whether it is worth spending.
8. Set aside 10 percent for uncertainties:
Educate them about the importance of savings and how they can come to the rescue during emergencies. Make them understand that life is often unpredictable and no one knows what future holds for them, in such situation it is better to be prepared from our side so that whenever such a situation arises we can handle it with ease. Enlightening the kids with this wisdom can help them understand the reality of life and they can develop a practical approach towards work from a very young age.
9. Encourage kids to save:
Educating them about investing their money and how interest can be earned will help them know the concept of investments and savings. Also, when they are a bit older you can introduce them about investments in the stock market and also explain to them the pros and cons of it. This will give them new insights into the various investment options and the significance of building an investment portfolio.
10. The “10-10-10-70” plan:
There’s no shortage of charities, relief organizations etc. to which your kids can direct this third tenth of their income. This could easily turn into a family project where your kids learn about donating concept. Your children might want to reserve some funds and give it away to the needy or it can be used in own communities for welfare purpose.
Following the above steps does not give you a guarantee that your child will become financially independent for the rest of his/her life but having said that it is a good parenting tip to teach kids about money management and at least sow the seed of saving money from a young age.