7 ways to make your kids money-savvy

Money is an integral part of our lives and managing the same efficiently is a tough ask even for adults. It is unfortunate that we are not taught money management in school. It is important for children to learn money lessons early in life so that they can inculcate some of those lessons whe they become adults. Parents play an important role in developing money habits in children.

Given the kind of environment kids are growing up in today, it becomes important for parents to impart lessons on making children financially responsible as also preparing them for the real world where they will be exposed to incomes, expenses, credits cards, loans etc.

Let us look at some of the ways in which money can be introduced to children. Of course age of the child would determine what level of money interaction should be made. 

The author is chief evangelist, Perfios.com

1. Providing a regular allowance or pocket money

Pocket money is a great way to introduce kids to money management. You must ensure that the pocket money is age appropriate and a fixed amount. You may fix up a daily, weekly or monthly allowance as appropriate and not oblige for any additional money over and above the agreed amount.

This will help in incultating the habit of spending within limits and make them conscious of how and where they should spend.

2. Introduce budgeting

It is not unusual for kids today to be lured by various games and toys. Walk into a toy store and the sheer variety can make anyone go crazy. You may take your kids shopping but it’s not a good idea to buy them everything they lay their hands on.

Before going out for shopping, agree for a shopping budget with your child. Lets say you agree on Rs 500. You can tell the child that she can pick up anything up to Rs 500 and not a rupee more. This would not only help in developing maths skills but also give the child a sense of independence about choosing what s/he needs.

It will also create a sense of comparison in the child’s mind about the price and the value of the object to her.

3. Piggy bank

Piggy bank is a wonderful concept to introduce children to the concept of savings. Kids love to fill up their piggy banks right from age of three years. Even at that tender age, they are able to understand that what goes into the piggy bank is precious and they don’t want to give it away easily.

You can also create a system where you may agree to give your child a certain amount of money on completing a task such as cleaning up their room or helping with any household chores. Ensure that the money goes into the piggy bank rather than being spent. Encourage them to open the piggy bank periodically to count the money they have collected.

Once the child is older, you can also take your child to the bank and show her how money can be saved in the bank. A lot of banks have introduced accounts for kids with facilities such as debit cards to get children exposed to banking. 

4. Don’t use money as incentive for good behaviour

While it may be good to incentivise a child for doing work she usually does not require to do, parents should refrain from rewarding the child for certain things such as doing their homework or behaving in the right way.

These should be things which they should do in any case. Incentivising for things which children are supposed to do may make them do it just for the monetary payoff.

Also they may decide that the deed is not worth the money and hence not do what they should be doing in any case. 

5. Learn to say NO

Most couples today have a single child and hence are willing to give in to any demand of the child. The habit of parents of not saying “no” may cost the child dearly as she grows up. It may make children stubborn and they may never take “no” for an answer from anyone.

Explain to your child why you are saying no and reason out with her/him. They may feel bad temporarily but it’s only a matter of time before they realise that it was the right thing to do. 

6. Discuss money with your children

Once children grow up, you can discuss with them about your finances to the extent they can comprehend it. Talk to them about savings, assets, liabilities and investments.

Use real life examples for them to be able to relate to these concepts. Discuss with them about what you are planning for their future. Children are inquisitive and as parents, always approach their questions with an open mind and answer them patiently. 

7. Set an example yourself

Children pick up the most by observing their parents. Hence it is important to practice what you preach and set the right example. If you manage money well, pay your bills on time, spend wisely, your children will pick up the same habits.

You have to be careful about your own behaviour and money habits because your kids will tend to follow your footsteps.

Children are impressionable and it is important that when it comes to money habits and lessons, parents should keep it simple and fun so that the children think positively about money.