7 important money management lessons you must teach your kids

According to experts, taking on financial classes at home can be fruitful for your little one. Check out these money management lessons now

Money management lessons for kids

A few years back, ASSOCHAM, a well-known industry body in India came out with a study named “Trends of Pocket Money in Urban Areas” that made some interesting revelations. It said that school and college-going teenagers in metropolitan cities are getting anything between Rs 3,600 to Rs 12,000 per month as pocket money from their parents that they are spending on visits to malls and multiplexes, mobile recharges, electronic devices and other ecommerce activities.

This is in comparison to a decade back when teenagers who used to get Rs 450-500 per month and used to consider themselves rich.

With the evolution of technology, growing costs and changing lifestyles, teenagers of today are not expected to manage with the old school thoughts or figures, but are aware of financial management.

This is a question that parents need to ask to themselves and teach their children about the importance of money management from a young age.

Unlike the past, children do not witness physical exchange of cash. This makes it difficult for children to wrap their heads around the concept of limited funds and they often think money as some unlimited resource when parents transact online or use credit or debit cards at retail outlets.

Here are seven hacks to help you teach money management to your kids. Start GALLERY.

At the beginning

In order for children to grasp the idea of money, it is important for parents to begin teaching their kids about money right from the time they are old enough to accompany you to the ATM or to a retail outlet.

For a young child of 3-4, the ATM is actually a great place to start, where you can tell your child that money does not really come from a hole in a machine, but when you use the machine to withdraw funds, you have lesser money in your bank account.

Begin by explaining how you must work in order for the money to come to the bank account in the first place.

Counting coins and notes

For young children, introduce the idea of currency and teach them to distinguish between coins and notes of different values. Invent a game around it and make stacks of coins of different value. Help them to count the pile.

You could also assist them to put aside the amount needed to buy their favourite chocolate to tell them the value of the same.

Shop and learn

For slightly older children who have accompanied you to a supermarket, ask them to help you out to pick out household supplies. You could tell them to take a pick from an aisle and explain the concept of price difference between a cheap and an expensive product in the same category.

The affordability factor is important in this context and the supermarket is a great place to explain to them the difference between the “needs” and the “wants”.

Introducing the idea of credit

If a child is pestering you for a toy, don’t give in or admonish her. Instead, try to be patient with her by giving her the bait of saving up to buy it at a later date. If she is not relenting at any cost, it may also be a good idea to introduce the idea of credit at this point of time.

You can tell her that you will lend her money for purschase of the item and she must return the amount to you within a fixed period of time. Else she will have to pay a certain percentage of the amount you spend now as interest.

If you can dint this habit early on, instead of gratifying every demand, you will have a child who savours each purchase that she has made from her “own money”.

A bank account and debit card for your child

From the time your child is old enough to get pocket money, teach her about the basics of earning money and accounting for it. It may be a good idea to show you child your own salary slip and give her an idea of how you spend and save from it.

You may even open a bank account for you child and all the monetary gifts on special occasions can be redirected into this bank account. Children love to feel “grown up” and this may be a good exercise in cultivating independence in them.

There are several banks who have debit cards for children. Giving them ownership of plastic money is a good idea as long as you keep tabs on what they spend.

Budgeting and tracking expenses

A pre-teen or a teenaged child is old enough to learn about budgeting and setting goals. For fixed expenses each month, such as mobile phone recharges or multiplex or café visits with friends, encourage her to start budgeting.

Children these days are very technology savvy, so ask them to use apps to track their spends. A teenager may also be introduced to the merits of financial planning. For instance, you could guide her to direct a small amount of Rs 500-1,000 each month into a systematic investment plan (SIP), each month, that will help her meet a specific financial goal at a later date such as a purchase of an expensive gadget, a holiday or even a big bash for a milestone birthday.

Keep a check on spontaneous purchases

children these days have easy access to e-commerce apps on their phones and can easily use them for spontaneous purchases. Keep a check on this, and instead of stopping access altogether, encourage them to build up a shopping list by researching various websites and getting the best price.

Once agin they must be able to distinguish between their needs, wants and wishes and should be able to fund small purchases from their pocket money.

Lead by example

Lastly and most importantly, lead by example yourself. Do remember that your child is like a sponge soaking up each and every habit of yours. So lead by example by setting out financial goals, saving up for emergencies and spending judiciously. If you are responsible with your money and have passed on the same values to your child, you can be reasonably sure she will handle money matters deftly when she is on her own.