Are Your Spending Habits Influencing Your Children?
Jun 01, 2019

Author: Aditi Murkute

(Image source: Photo by Yogendra Singh from Pexels)

Children these days are highly observant to learn from anyone in their surroundings and behave accordingly. But at the same time, they are innocent little clays. The way you mould them they grow up to be.

"Practice what you preach" is an adage you've probably heard in different situations. When it comes to parenting you've experienced that though your child may not always listen to you, they are constantly observing and imitating what you say and do.

So, if you want your children to grow up with good values, you have to exhibit good behaviour because they are looking up to you.

In the same vein, have you considered how your spending habits and money management skills can influence your children?

For instance, if a parent is an impulsive shopper or a spendthrift, the child might grow up to be one too. Money management is not taught in schools. This is a skill one acquires through observation and home-grown, daily practices.

You want your child to be successful in life. Undoubtedly, learning to manage their personal finances intelligently is a major life-skill.

And if you want your children to be good at money management introduce the concepts to them in piecemeal bites and help them to refine their skill. Educate your child on what it means to earn, spend, save, borrow, and share. You have to show them how these core elements work.

Here are ways you can begin with...

  • Do the money talk

    Getting your child to understand the 'money' concept can be difficult in the beginning. But you can show them how money is earned and purchases/transactions work in simple, every day ways. As they grow up, introduce the theory of inflation and the time-value of money focusing on the rising costs of day-to-day expenses. This will help them realise the value of money. Involve them in certain financial decisions when they are mature enough to understand more.

  • Introduce earning

    Children love to contribute in a 'grown-up' way to the family, be it setting the table at mealtimes, helping you with household chores, etc. They are motivated by the recognition, praise, and reward they receive for doing a good job. When you give them pocket money, you are introducing your child to the earning concept. One of the ways you can reward them for completing a task perfectly is with extra money. This can boost their confidence and encourage them to do more tasks efficiently as well.

    Earning will not only give your child a sense of independence, it will also teach them about work ethics and habits. They will learn how to evaluate and negotiate job alternatives and the co-relation between money, time, skills, and energy.

  • Follow a Budget/ Mindful Spending

    You must track your expenses, fix a monthly budget, and stick to it. This includes mindful spending and practical planning. At times, you may be able to afford something, but it can imbalance your budget. So, when you're shopping, show them how to make good buying decisions. It will enable them to look at value-for-money and opportunities to compare with alternatives.

    Make them realise the difference between wants and needs. Involve your children in the budgeting exercise to make them aware about the difference and how to maintain a fine balance between luxuries, wants and needs.

    Plus, the timely payment of your bills and other instalments for your savings/investments will show them that it is the good practices of being a responsible person.

    This improves their decision-making capabilities and when they grow up, your children will be equally responsible.

  • Introduce goal setting and saving

    Once your children have learned to stick to a budget, empower them to save and invest. A rupee saved is a rupee earned. Give them a piggy bank and ask them to save from their pocket money or rewards which you pay them for completing tasks.

    Introduce games wherein you are making them realise that to achieve something they must wait or condition them to cross a threshold grade to get what they want.

    This will teach them patience, delayed gratification, overcoming hardships with smart/hard word, and goal setting.

  • Introduce the idea of investing

    Investing can be best explained by involving them in banking transactions. Through this activity you introduce them to the concept of the power of compounding. The growth in balance at a fixed rate will make them aware of the time-value of money.

    Teach your children how to bargain and the value of purchasing power. Then stress on the importance of investing in conjunction with the time-value of money and in turn the power of compounding.

  • Risk of loss

    For children the risk of loss would be losing their favourite toy or not going to their friend's birthday party. Make them understand this can happen only if they do not listen to you the parent or act stubbornly.

    Draw parallel lines to teach them about investment risk. Even your investment risk profile affects them, if they see you being risk averse and ignoring equity investments you will lose out on potential gain and vice versa. Thus, even you should try to maintain a fair balance while investing.

    This develops the child to be aware about his weakness and strengths and what all risks he can take in his life to achieve something.

  • Prepare for contingencies

    Risk of loss and preparing for contingency are like two sides of the same coin. So, teach them to have back-up plans. This makes them realise when you lose something, it is not the end of the world and that you are ready to accept it and move on.

    This enables them to be prepared for any foreseeable event. Like a Band-Aid is kept handy in case of any injury. Similarly, explain to them how having a contingency fund, adequate medical coverage, and insurance helps.

    Explain to your child how to handle any other unfortunate event, for e.g. if they lose their way, they should not panic. Teach them that they need to have emergency contact information and some extra cash always (as reserve) so that they can get to a familiar destination.

    This makes them build a contingency fund when they grow, provided you have one as well. Remember, children follow in their parents footsteps.


As a parent, you need to practice the values and ways of living that

you teach your children. They learn most through your experiences. If you want your children to enjoy a sense of freedom and financial independence, ensure that you set the right example. You are your children's role model.

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