What to teach kids about money

What to teach kids about money

It is always better to start early – since childhood. After all, the values we teach kids continue to hold ground their entire life. Most parents concentrate on teaching their children good manners and safety. But when it comes to money, many questions remain, like ‘Where to start?’ and ‘Why should we teach kids about money?’

Read on to find out all you need to know about teaching your kids about money.

Why should children be taught about money?

We are in an age where credit and debit cards are used more than the actual money. So, it is difficult for the kids to understand and comprehend that buying and selling requires hard cash. It is important for them to understand how money is earned, saved or spent for the day-to-day necessities. Providing children with basic financial education helps them understand the concept of money. This will help them make informed choices and take responsibility for their actions in the years to come.

When is the right age?

The best answer to this is: start as soon as the child learns to count. Kids need to understand that money is not a taboo subject and this needs to be clearly indicated. It is important for them to know the effort that goes into earning their daily luxuries.

Experts suggest that the concepts of money should be taught in an age appropriate way starting with the time when the child learns to count. For example, at the age of five, you could start taking them with you on your shopping spree. At eight, they can get their own piggy bank, and at the age of 15, you can encourage them to open a savings account. At 18, you can advise them about using the credit and debit card wisely. Some also suggest you should start talking to them about investments since their teens. In fact, some even suggest giving them a small sum to be invested in different options, and then comparing the performance after a year.

Some simple rules

These are some simple values and rules that can help mold your kid into being money smart.

1. Delayed gratification

As adults, we hear the word 'No’ quite often, whether it is from an employer or from a bank. As children, it is important that they hear it too. It is important to teach the kids that they can get what they want when they know how to wait for it. It’s common for your child to ask for the latest gaming console or some other toy. Instead of saying an instant 'No’ or a 'Yes’, you could ask them to earn a few reward points. This teaches them that patience is required to earn what they are looking for. They will understand that the wait is worth. It may even seem sweeter too, since they have earned it.

2. Teach them Wants versus Needs

Your child might want the latest game console and also want the latest bicycle. There is a thin line between the wants and needs. Make your child understand the difference. This will prepare them for making good spending decisions in the future.

3. Allow them to learn from mistakes

As adults, we are not perfect. It is not fair to expect perfection from kids. Allow them to make mistakes. But also be cautious that they learn the right lessons from the mistakes occurred. It is essential that they have the liberty to make 'wise’ choices. On the other hand, they need to know the consequences of their actions too. This applies to financial choices too. By experiencing negative consequences first hand, they will learn to make smarter financial decisions.

4. Make it comprehensible

It is important that you get down to the kids’ level of understanding when it comes to teaching them about money. You can give them all the theoretical knowledge required, but then, it is always best to get a first-hand experience. Allow them some permissible amount of money for the Piggy bank. For younger kids, it is best always provide money in denominations that encourages savings like Rs 150 (Rs 50 of the 100 can be saved). As they grow older, you can teach them about savings accounts and interest rates. It is imperative for them to understand that the money they save should work as diligently as the kids do to accumulate a good amount. They need to learn that idle money does not grow.

5. Preach book-keeping

Making record of every day expenses makes your child understand the value of money. Make it a topic of everyday dinner discussion so that your child comprehends the reactions of everyone in the family about day-to-day spending. Make it a habit to write down the family expenses at the end of each day. Teach by example. You are after all your child’s true mentor. Every child learns by imitation. Establish this system for your child. Encourage children to place receipts from all purchases in the envelopes and keep notes on what they do with their money.

6. Share and give back

Create an exercise with your child about managing money. Set targets that can be achieved. One of the targets can be to donate or give back some money. No child would want to end up with a loss. This will teach valuable lessons about both – donating money as well as how to avoid making losses

 Happy Investing