Money management for kids

How to teach your child the importance of Money Management

Have you been in a situation where your child is cranky and demanding a particular gadget or object that is expensive, not realising its cost? Indeed, most parents must have come across such a situation at least once in their life. Would this have happened had you taught your child the importance of money and how to manage it?

Think about it: When your child is out in a store or while you’re shopping online, they come across a specific product that they want to buy not realising the need of weighing its need vis-à-vis its cost. Here what you wish for is that your child knew the importance of money while being able to prioritise where to spend it and how.

This teaches us, parents, that we need to instil in our children the skill of money management so that they can be future ready with how to balance and manage their spending & savings. So, listed below are a few ways in which you can teach your child how to manage money to help them fulfil their aspirations while simultaneously save for their future needs.

Start with a piggy bank
When your child is five years of age or more, give them a piggy bank where they can collect the money they have received as part of gifts or any allowance that you give them. Nothing makes a child happier than knowing that they have money saved in a bank from where they can withdraw it whenever they want to buy something for themselves. This will also help them understand the limits that they have if they wish to buy something.

Set monthly allowances
Pocket money, monthly allowance, these terms sound familiar, don’t they? We all have received a specific amount of money during our school and college days can be called as a monthly limit in which we were supposed to manage our travel, food, parties, movies, shopping and what not! Indeed, this has helped us manage our money better, plan our savings and set aspirations accordingly. Why not do the same with our kids?

Provide bonus income opportunities
While you have set monthly allowances for your kids, provide them with opportunities for earning extra income time and again. For instance, you can ask them to help with a household chore and give them some money as a bonus if they do it diligently and in the designated time. A win-win for you, this will encourage your kids to help at home while teaching them how to earn money by working for it.

Inspire them by setting an example
Kids learn from their parents. They try to enact their parents’ behaviour and take the values that their parents stand by. Ensure that you are well-managed with your spending and saving patterns because your child will learn such lessons from you. Set an example by not being impulsive about your expenditures and planning your finances well.

Teach them the importance of giving
It is essential to teach your child the importance of giving and sharing. Involve them in some kind of charity or donation, which will make them contribute to the ones who are less privileged than they are. Another win-win for you, it will enable your child to learn the feelings of compassion, sympathy, and kindness. It will also help them understand how a small amount of money can change someone’s life giving rise to feelings of contentment in what they have.

Being content is important
It is important to teach your child to be content in what they have. You must have come across statements like “my friend got a $100 dress for her birthday,” “my friend’s dad got him a bike to travel to college every day.” It is essential to teach your child the criticality of a product they want to buy or own versus the spending limit that the family has. This will not only help them prioritise their necessities, but will also enable them to understand their limits and how to be content in what they have.

Encourage them to earn their money
While millennials learned how to create entrepreneurial opportunities, gen zers have entrepreneurship in their genes. Given the current times and the involvement of technology in our lives today, there are ample opportunities for youngsters to earn money by just being a little creative and putting in a little effort. You can encourage your child to join summer internships wherein they can learn new things while being paid for it. The amount they earn can be used by them to buy something they have always wanted to own or fulfil any dreams they have in store. Once they start earning, they will always look for options and make a wise choice before buying something, instilling in them the art of money management.

The modern-age kids are smarter than all the previous generations we have seen. This calls for a new style of parenting that can cater to the behaviours, needs, and expectations of this new generation. Parenting 4.0, as we call it today, is nothing but a parenting style that teaches us to change our parenting style as per the changing times. Thus, it is crucial for us to change our behavioural patterns and our way of dealing with our kids as they are different from us in the same way as we were different from our parents.

Frequently Asked Questions (FAQs)

How do I teach my child financial responsibility?
Here are some tips that can be used to teach your child financial responsibility:

  • Teach them to budget their expenses by setting a monthly allowance.
  • Tell them about the value of saving their money for the future.
  • Encourage them to earn a little extra money.

How do you teach kids to save?
Here are a few ways that can help in teaching your kids to save money:

  • Give them a piggy bank to put the money they have received.
  • Open a bank account for them to keep their money.
  • Create a timeline for saving an X amount of money in Y amount of time. The earlier they are able to save it, the better it will be.
  • Lead by example. Set an example for them by planning your expenditures and savings.

How do I teach my teenager to budget?
Start with these steps to teach your teenager how to budget:

  • Set a simple budget for them.
  • Give them an allowance for college.
  • Open a bank account for them and give them full responsibility for it.
  • Team them to be content.

How do I teach my child to invest?
Here are some tips to teach your child to invest:

  • Allow them to save first and invest later.
  • Encourage them to set their financial goals.
  • Teach them to start with investing in low-capital instruments.
  • Tell them about the simple ways to earn money.

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