Teaching 'value of money' - a guide for the parents
Teaching 'value of money' - a guide for the parents
As herculean a task it may seem, it is actually not that daunting!! To help in the process, following are a few suggestions, that can be easily implemented in your daily routine and BINGO, we have a chance of having a financially responsible individual, which unfortunately most of us became after many trials and errors. - Explain how money works: let them know that there is no money printing machine installed in each ATM. It is the money earned by your hard work that was just kept in the bank, just like their piggy bank. Once that money is spent, one has to wait and earn more to put in the bank to spend.
- Build their money skills: addition, subtraction, basic Maths, mental maths, abacus; all will come in handy. Stand by their side and let them pay for your next grocery purchase. If making cash payment, let them collect the change and check for the balance money received. If paying by card, let them hand the card to the cashier, (you might want to enter the pin yourself... though at your discretion, this might also be delegated;)) but let them collect the card back and check the bill. Same goes while making the wallet payment.
- History of money, honey: Tell them the concept of rupees and paise. If they are mature enough, then the evolution of currency from 'anna and paisa' to the current 2k currency note. Let the concept of inflation sink in.
- Allow your child a small allowance: just enough to buy small 'wants' - occassional icecream, treat with a friend or the likes; 'needs' to be taken care by you only. If they want something bigger like an expensive book or a toy, encourage them to save from their allowance - give them a transparent piggy bank where they can see their money grow. Let them make a choice to save enough to enjoy a big 'luxury' by sacrificing the joys of small 'wants'.
- Let them make their own mistakes while spending their own allowance: remember that the allowance that you allowed may be 'tiny' from your perspective, but it is hugely substantial from their viewpoint. Use this anomaly to give them a big life experience at a little cost to you at this small age. If while spending, you feel that they are being reckless or impulsive...let them be...under your own watchful eye. Once they have realised their folly, let them mourn the financial loss, let them wait for their next allowance cycle to enjoy their financial freedom again, don't jump in prematurely to make the loss good.
- Encourage them to donate: as one parent said to me - ' kids should be made to donate their own money'. Encourage them to donate a part of their savings or allowance. Doing charity by giving away from parents' pockets does not teach the right spirit of charity….
- Teach them that debt is bad: especially splurging via debt is a crime. To give this message, next time when they are desperate to own some "want", let them borrow from you on the security of their future allowance. Don't hesitate to be tough and even mean while setting repayment schedule and (if needed) interest charges. Let it sink in that ' if you can't afford it on cash, you can't afford it at all' , which also brings us to the next tip ;)
- Interest is only interesting when you are earning it: occassionally, borrow from them (you could be liberal and prompt them to set some favourable interest rates this time) and let them see how their money grew when they invested it in right avenues (i.e you)
- Let them do some real investment: open a bank account (the simplest and easiest way) to let them know how money earns money. Alternately, if you think that they are ready, let them invest in some stocks, mutual funds under your watchful eye. Give them inputs, but let them decide.
- Encourage them to keep a record: It is better to tell your money where to go than to wonder where it went. Teach them some basic record keeping techniques, and let them handle their own money. The sense of responsibility coupled with independence will surely enthuse a sense of accountability in them.
if you have any other tricks up your sleeves, which you successfully tried with your kids or were tried on you, do enlighten us by writing in the comment section.
Comments