Teaching children the life skill of managing money
My 6-year-old daughter recently went for her friend’s birthday party at an upscale spa and, of course, it was a themed party with all the frills. The girls had a great time and I am sure that this party for 20 kids would have certainly cost the parents upwards of Rs50,000.
I keep hearing from my kids about their friends getting expensive toys or the latest gadgets from their parents. Many small kids believe that money comes from the ATM and teenagers believe that the parents are an ATM.
Many a time, parents are too busy with pressures of work and thus give in to their children’s demands. It seems like the easier thing to do.
While parents want to give the best education and quality of life to their children, they also need to equip them with various life skills.
I see too many parents these days who don’t let their kids do any chores and ask them to only focus on studies and extra-curricular activities. The only money management that kids have to do nowadays is with their pocket money.
The issue with this is that kids end up believing that money is solely for spending, not saving. Therefore, they do not understand the value of money or how to make money grow.
Learning money management skills will help children in navigating their own lives better and who better to teach them than their mother.
Children typically emulate their parents’ money habits and as they learn through observation, the first thing to remember is that actions speak louder than words.
Money concepts need to be taught throughout the growing years of a child by using examples and activities. In India it’s never been considered good to talk about money but it is important that mothers do away with some habits like letting children think that money comes from an ATM or rewarding children through money for good work.
At different stages of life, different concepts will need to be explained.
Small children typically want a toy when they see one and parents end up buying it even though the kid may hardly play with it.
It’s important to show that you can’t give in to every want of the child and that there are toys that may not be worth the price being charged. Delayed gratification teaches them patience and a certain value for their belongings.
With children between 8 years and 13 years, it’s a good idea to talk more about money in a casual manner. For example, while shopping for groceries, compare two brands of the same product to show value for money.
The focus should also be to get the child to think if a particular item is really required. Often, kids at this age want to buy books, branded shoes, small gadgets and other such items.
Firstly get the children to check the prices of things that they want to buy and inculcate the concept of value for money.
Is it worth the price? Is there an alternative product available at a lesser price? Will the product be useful in the long term?
Examples of previously purchased items that are not being used can be given but not in a criticising way.
Over time, kids will automatically know which products are worth buying and which are not worth their price.
Teenagers are typically dissatisfied with pocket money and have huge financial demands. They face intense peer pressure and would like to own a credit card.
With student purchase loans getting popular to buy gadgets, it is especially important to teach teenagers financial responsibility.
This could be done by getting them to pay some bills from their pocket money, like their mobile bill, or by sending them to buy the groceries so that they get an idea about the regular expenses that the family has.
Ask them to keep records of how their pocket money is spent and set a goal of trying to save 10% of their pocket money every month. The idea is to inculcate a habit of saving at an early age.
This is also a good time to introduce them to the banking system so that they learn how to perform various financial activities.
They could do this through an account in their name where you move limited funds. Help them understand the usage and downside of credit cards and loans.
Children would appreciate the funds spent on postgraduate colleges if you discuss openly about the costs associated with the same.
When the child starts working, it’s a good idea to let them go through a money management course to help them start their own financial life in the right way.
Knowledge about money is as important as preparing a child for employment.
Life skills are necessary to make children independent and self-sufficient.
I have my parents to thank for making me financially prudent at an early age, so much so that when I got married after a couple of years of working, I had a decent amount saved, which we used to buy a car without having to take a loan.
As we celebrated Children’s Day this year on Monday, let’s also teach our children about the importance of giving and sharing with the less fortunate. Teaching financial prudence can help our children be charitable and give back to society.
Mrin Agarwal is a financial educator; founder director, Finsafe India Pvt. Ltd; and co-founder, Womantra.