10 Lessons On How To Make Your Children Money-Wise
May 23, 2017

Author: PersonalFN Content & Research Team

Today, children are smart, sharp, observant, quick learners, tech-savvy, and are growing up faster than you can imagine. They develop needs, wants, and lifestyle habits at an increasingly younger age. With ever- rampant materialism entering homes through ‘child-centric’ advertisements, as a parent you need to be cognisant and careful.

Celebrated investor and author, Robert Kiyosaki, in his best seller “Rich Dad, Poor Dad” beautifully encapsulates the magic of wealth creation, “The single most powerful asset we all have is our mind. If it is trained well, it can create enormous wealth in what seems to be an instant.”

Indeed, nature and circumstance are what we are born with/in, and we need to consistently nurture our mind to prosper in life.

Children have access to more information, resources, and their innocent minds quickly develop with healthy or unhealthy beliefs/thoughts that influence their actions, future decisions, and therefore, influence yours.

We, at PersonalFN advocate, the ill-use of money can be detrimental to people of any generation.

In this article, we take on how to teach children the ‘value of money’. We always recommend that your spouse and children are involved in all family/household/personal financial decisions, and that their views/opinions are considered, because it has long-term impact on the family.

For example, when you’re planning a family holiday, sit together to discuss expectations, budget, and ways that everyone in the family can save for and contribute to it. Follow this exercise when creating a financial plan to invest your hard-earned money, say for your child's higher education or for your retirement. Open discussions on how income is saved and invested give your children the techniques they could practice to stay financially healthy, but make sure you’re on the right path first.

Here are 10 lessons to teach children on money:

Lesson #1: Patience is the key

Money does not grow on trees — children should be made to realise that.

So, if they wish to buy something, the first lesson is patience (this applies to everyone). Delayed gratification can be good for financial health in the long run.

When you venture out shopping with children don’t buy things that they don’t need, no matter how much they nudge you. Help them distinguish between needs, want, and desires, in a light-hearted manner using the correct analogy. To give you a paradigm, when you’re in a queue, explain the importance of waiting for your turn; because all things in life do not come at one go, on a platter – we got to work towards it.

Lesson #2: Introduce them to budgeting

Maybe at a very early age, they may not understand the niceties of drawing up a prudent budget. But over time, involving them in the budgeting exercise will reap manifold rewards; they’ll turn money-wise. Remember, children learn lot by listening and observing.

When you provide a certain amount for their monthly pocket money, explain the rationale. And preferably, give the pocket money in different denominations —Rs 500, Rs 100, Rs 50, Rs 10 — so that they will be able to handle money sensibly, according to their needs and desires and come up with ways to save. Always insist that they write an account of how the money was spent, which will help them realise where they overindulge and thus, highlight the need to refrain from.

Lesson #3: Introduce them to goal setting

As children are prone to get carried away by trends and materialistic fancies of life; ask them to list down their short-term goals (such as buying gadgets, an expensive toy, cycle, branded clothes, shoes, etc.), and long-term goals (such as purchasing a motorbike or saving for a A++ college education or that holiday). This will help your children prioritize and realize their goals understanding the benefits of delayed gratification.

Create awareness on how inflation erodes the purchasing power of hard-earned money. Educate them to calculate the approximate future value of the things, the rising costs, and how to accomplish the vision and dreams they have for themselves by encouraging them to start saving for these.

Lesson #4: Bring in a few money games

Kids love games, and these can be a great medium of learning. Board games like Monopoly, Game of Life (similar to monopoly), Cashflow (inspired by Robert Kiyosaki’s Rich Dad, Poor Dad teaches how to be in better control of your finances), Payday (teaches how manage your monthly budget) can impart a variety of tips on money management if shepherded prudently.

Lesson #5: Set forth a piggy bank or a bank account

Toddlers can be introduced to a piggy bank, and its purpose explained as they grow up. Initially, when you hand them smaller denominations to deposit, teach how much is being deposited. As they grow up and begin to receive pocket money, ensure they continue with the habit by saving money.

For older children, you may open a ‘savings bank account’, and park their pocket money in it. This’ll introduce them to ‘interest on savings’, basic banking transactions, and help them recognise the power of compounding . This will prove to be an inspiration to save more and invest money in productively. And overtime, it’ll gear them up for financial planning.

Besides, acquaint them to the nuances of finance. For an instance, if you’re giving your teenagers an add-on credit card, first take them through how the credit card bill works and the perils of excessive usage of a credit card. Explain what their responsibility will be about owning an add-on credit card, in case of extravagance or emergencies. Similarly, when dining out, apprise them about the taxes levied and how they’re charged.


Lesson #6: Teach them to bite as much they can chew

In money management parlance, this refers to as living within ones means. Living within a budget helps us do that, and sometimes when we go overboard; it serves as a compass.

Children are bound to make mistakes while handling money, but if you, as parents, correct and guide them prudently, it can serve to be a learning opportunity for them. “There are no mistakes in life, just learning opportunities”, says Robert Kiyosaki in Rich Dad, Poor Dad.

So, when handing over pocket money, ask for an account; it’ll help you assess where and how they’re spending. And when you see impulsive buying behaviour or expenditure on frivolous things, duly correct them. Remember the proverb: A stitch in time saves nine.

Lesson #7: Take them for workshops on money management

Today, many schools organise financial education workshops. Encourage your kids to participate; it can serve as a good learning experience. After they attend, ask them pertinent question to judge what they’ve grasped. And if a learning kit is provided, make it a point to do rounds of revision.

For the ones who’re in high school or college, seminars / webinars on investing are perfect to provide a perspective on savings and investing. This would develop their skill as good money-managers.

Lesson #8: Set monetary rewards

Of course, you could delegate some of the daily chores – for example, running errands, contributing a small part in the utility bills – to children as they grow up. But begin to remunerate them from early on in small ways for saving other good lifestyle expenses like electricity, resources, for recycling or reusing things, using their talents for community service, etc. so that they can learn to relate money to work.

Plus, encourage them to pay certain personal bills from their monthly allowance. For example, most teenagers today use mobile phones; give them a budget for the usage and let them pay for their own expenses. This will indirectly limit any unnecessary expenses and create the impetus to spend money sensibly.

Also, when shopping and if your child helps you make sensible purchases – say he / she takes you to the farmer’s market for that he/ she has learnt in school – please go ahead, as it can save you a great deal of money. Acknowledge them for the better bargains and reward suitably. The market economy in action, teaches a lot more than what classroom do.

Likewise, if he /she can get you better bargains owing to some discount coupons pinned to his/her online account or otherwise, appreciate it and/or remunerate it; because that’s an additional household savings.

Lesson#9: Develop the art of giving

Along with saving and investing, foster the art of giving. Help them realise that not all are privileged, and therefore when you’re one of the fortunate ones, serving the society by means of ‘paying it forward’ is vital. You see, giving is also an essential component of financial literacy; it seeds in empathy towards society amid the path to wealth creation.

Hence, the next time your family visits a store or a restaurant with a donation box to help the penurious and those in pain, ask you children to give a part of their pocket money for the cause. Lead by example in making a contribution. Besides, encourage them to volunteer for cause of their interest – say, animal welfare NGOs, street children welfare NGOs, and so on.

Lesson #10: Be a role model to your child

Last but not the least, while you teach them all these lessons; being a role model to your child is the Key. This means, practice what you preach for their good. Kids consider their parents as their idols when they’re young. Therefore, ensure you’re setting a perfect example. Undertake budgeting, save, plan, invest, give …and do all of it thoughtfully, while you shower them with the best you can provide for them.

Striking the right balance is imperative and you ought to cultivate a prudent personal finance culture, which proves valuable for the entire family’s financial wellbeing. Over the years, your children should be able to look up to you as money-wise parents.

End note…

While parenting, germinate a ‘scientific temper’, and values that can give your children the techniques, tools, and wisdom to make sensible decisions in life. Plant a seed early to bear the fruit in time. Give them what you can afford, but also instil the value of hard-earned money in a suitable fashion.

So, as parents take the correct steps educate and motivate children to use money more efficiently, and make them money-wise.

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