As a parent, you always encourage your child to study well, play sports and pursue hobbies for their all-round development. But, you may be missing out on inculcating a very important life-skill – money management. Your child should know that life is not always a fairy tale or a bed of roses. So, your parenting duty does not end with taking care of all her demands and making her a good human being. It also includes making your child financially literate from a young age to help her brave the practical realities after flying away from the home nest.
Here are five money habits you must drive home in your child:
- A Penny saved is a Penny Earned
Explain the importance of savings to your child and how saving little bits regularly can add up to a huge amount on a later day. The best way to do so is to ask her to save her pocket money and cash gifts received on birthdays or festivals for a new toy or a dress she wants. In fact, you can even promise her weekly/monthly bonus on the amount she has saved. This will also introduce her to the concept of a savings account and interest. If your child is old enough to read and write, you can deposit all her savings in a minor savings account and show her how such an account operates in the real world.
- Spend Only After Saving
Make sure that your child knows this money mantra by heart – ‘Do not save what is left after spending, but spend what is left after saving’. You can tell her how she can increase her savings balance if she spends less or wisely. You can even settle for a penalty, such as no pocket money for a month in case your child ends up spending more. Once she understands this, she would know where to relax the purse strings when it comes to spending the money.
- Set a Budget
Encourage your child to set a budget for inexpensive or non-essential things that she can buy from her piggy bank. It could be a chocolate, a notebook or a set of stickers. Show her how she can maintain a diary or an excel sheet (depending on the age and familiarity with computers) to keep a track of money she has received and spent. Let her do the math and arrive at a figure she needs to spend or save every month. This will also teach her what are income and expenses, and how they can be balanced through the right budget planning. If she mismanages, it will only make her learn from her mistakes.
- Shop Smartly
Whenever your child needs something, take her along. This will not only put her in the driving seat of her financial decisions, but also help her to become a smart shopper. For instance, if she wants to buy a set of crayons, explain to her how she can get the best deal by visiting different stationery shops, and comparing the price, features and quality of various brands. It would be also a good idea to go shopping at flea markets with your child to give her first-hand experience on bargaining tricks.
- Work to Earn
There are chances that your child may not still appreciate the delicate matters of money if she doesn’t know where the money comes from. As long as she gets her pocket money from you, she wouldn’t understand that money needs to be earned. Give her examples of how you go to the office every day or the maid works at your home to get a salary. So, she needs to work as well to earn her share of moolah. She could perhaps do a household chore or run some errands for the neighbour. Every time she completes her task, she earns her allowance and realises the effort gone into earning money.
There are various ways to make money management a fun learning skill for your child:
- Play kid-friendly money based board games such as Monopoly, Easy Money, Cash Flow and Pay Day.
- Make a visit to a bank or an ATM kiosk.
- Buy or read children’s books such as ‘The Everything Kids’ Money Book’ by Brette McWhorter Sember, ‘Money Sense For Kids’ by Hollis Page Harman, etc. You can even download children’s story books such as ‘Raju and the Money Tree’, ‘Old Man Monetary’ and a few others from the Reserve Bank of India (RBI) website.
- Involve them in family discussions on the monthly budget and other financial matters.
Lastly, remember that a parent is the role model for the child. So, if you want to raise a financially responsible child, you need to lead by example.
Mohit Gang is the Co-Founder of www.moneyfront.in, an investment portal that offers Direct Plans of Mutual Funds. Having worked with HSBC and Citibank, Mohit has over 12 years’ experience in the investment and banking industry. You can follow him on twitter – @ or connect with him on linkedin – www.linkedin.com
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- Mohit Gang
- March 3, 2017
- 1 Comment